How Bonus Depreciation in the New Tax Bill Impacts STR Investments
Kate Stoermer 
Discover how bonus depreciation in the new tax bill impacts STR investors, tax savings, and cash flow. Learn key insights before investing in 2025
If you're considering investing in a short-term rental (STR) property, maybe you are wondering about bonus depreciation. With the latest tax bills proposing to extend 100% bonus depreciation, STR owners could see significant tax advantages. But how does this impact your investment strategy in the face of economic uncertainties and a shifting real estate market? Read on!
What is Bonus Depreciation and Why Does It Matter?
Bonus depreciation allows STR investors to deduct a large portion of the cost of qualified property (such as furniture, appliances, and certain renovations) in the first year instead of spreading deductions over several years. This can result in huge tax savings and improved cash flow, making STR ownership more attractive; see a more comprehensive description of STR tax strategies and history of bonus depreciation HERE
Under the new tax bills, if passed, bonus depreciation would remain at 100% rather than phasing out as originally planned. This means new STR investors could see immediate financial benefits when acquiring and setting up properties.
👉 Want to make sure you're maximizing your deductions? Grab our STR Tax Playbook to learn the essential strategies for tax savings!
How the Current Housing Market Affects STR Investments
The housing market is at a crossroads. While home prices are expected to rise modestly in 2025 (around 3.7%), high mortgage rates (projected to stabilize near 6.5%) continue to make real estate less affordable. For STR investors, this presents both opportunities and risks:
✅ Opportunity: Fewer buyers in the market mean less competition for properties, creating a chance to negotiate better deals.
⚠️ Risk: High interest rates can strain cash flow in the first year or two, making tax incentives like bonus depreciation even more critical for keeping STR investments profitable.
Read more about tax strategies for STR owners in my previous in-depth tax guide post!
Economic Factors to Consider Before Investing in 2025
Beyond the real estate market, broader economic trends could impact STR demand and profitability. Here’s what to watch:
📉 Rising Cost of Living: Higher expenses for travelers could shift demand toward more budget-friendly STR options rather than luxury stays; which would be a change from what we saw in 2024 where luxury price points saw the biggest increase.
✈️ Travel Trends & Trade Wars: New trade tariffs could reduce international travel, shifting STR demand toward domestic travelers. If your property attracts global visitors, be prepared for potential fluctuations in occupancy rates.
💰 Cash Flow Caution: Even with bonus depreciation helping upfront, STR investors should plan for slower cash flow in the first year or two, ensuring they can cover operating costs while the market adjusts.
Final Thoughts: Is Now the Right Time to Invest in an STR?
With 100% bonus depreciation still on the table (if the bill passes), STR investments remain a lucrative option. However, given economic uncertainties, investors should focus on cash flow management, market research, and tax strategy in making decisions about the right investment vehicle for you.
For many, “lucrative investment” isn’t the key focus, and with that in mind- short-term rentals may be a solid choice especially given the trifecta of potential tax benefits, cash flow, and appreciation.
🔹 Next Step: Download the STR Tax Playbook to ensure you’re maximizing tax benefits and setting your STR up for long-term success!
Want a deeper dive into tax strategies? Check out our full tax optimization guide for STR owners blog post!
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Hey Boss! I'm Kate, owner/founder of The CEO Host. If you are interested in taking a leap into short-term rentals - or have some questions about your existing business, my goal - passion, and career, is to help YOU succeed. I've coached hundreds of folks getting started or looking to optimize, analyzed more deals (and duds) than I could count, completed thousands of hours of education and training, attended conferences... So don't be shy. A good CEO knows to bring in expert help - and that's what I'm here for! Lets HOP ON A CALL and chat!
Categories: : STR finances taxes and risk management