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The Big Tax Advantage for Short-Term Rental Owners : Bonus Depreciation
- wendymonday
- Oct 3
- 2 min read
If you’ve been thinking about buying or improving a short-term rental, there’s one huge financial advantage you don’t want to overlook — bonus depreciation.
It’s one of the most powerful tax tools available to real estate investors, and for short-term rental owners, it can make an enormous difference in your cash flow and overall return on investment.
What Is Bonus Depreciation?
When you buy a property, the IRS allows you to write off its value over time — that’s called depreciation. Normally, that happens slowly (27.5 years for residential real estate).
Bonus depreciation, however, lets you take a big chunk of those deductions right away — front-loading what would normally be spread over decades.
You can depreciate things like:
Appliances
Furniture and fixtures
Flooring, countertops, lighting
Landscaping and fencing
Driveways, patios, and other exterior improvements
A cost segregation study breaks your property into these components so you can see what qualifies for accelerated depreciation.
Why Short-Term Rentals Are Special
Here’s where it gets even better.
Most long-term rental owners are considered passive investors, meaning they can’t use real estate losses to offset their W-2 or active income.
But short-term rentals are different — if you materially participate (meaning you manage the property yourself, handle guest communication, cleaning, pricing, etc.), your STR can be treated as an active business.
That means those bonus depreciation losses can offset other income, like your salary or your spouse’s income. It’s a powerful tax planning opportunity that’s unique to this type of property.
The Numbers Example
Let’s say you buy a $500,000 short-term rental and spend $50,000 on furniture, appliances, and improvements.
A cost segregation study might show that around 25–30% of your total property qualifies for bonus depreciation. That’s roughly $125,000–$150,000 you can deduct in the first year.
Depending on your tax bracket, that could save you tens of thousands of dollars in taxes — and dramatically improve your cash flow.
The Takeaway
If you’re buying or improving a short-term rental, bonus depreciation can be a game-changer.
✔️ It allows you to front-load your tax benefits
✔️ It can offset active income if you qualify as a material participant
✔️ It boosts cash flow and ROI from day one
As always, talk with a CPA who understands short-term rental tax strategy and cost segregation.
If you’ve been on the fence about purchasing a short term rental property, this is one reason to make your move before year-end.
Bottom line: Bonus depreciation isn’t just an accounting detail — it’s a real-world advantage that helps short-term rental owners grow faster, build wealth sooner, and make the most of their investment.
DISCLAIMER : I am a real estate agent, not a tax accountant. All information contained herein is believed to be accurate but is not warranted or guaranteed. You should contact your tax professional to confirm the tax advantages available to you.
