Bonus Depreciation is Back (and Here to Stay!)
What STR Owners Need to Know About the "One Big Beautiful Bill Act" (OBBBA)
As of July 2025, Federal Tax Law Changed
With the signing of the One big Beautiful Bill Act (OBBBA), federal tax law changed again - and this time, in favor of STR Investors and small business owners
OBBBA was signed into law in July 2025, restoring 100% bonus depreciation for qualified property placed in service after January 19, 2025 - and making it permanent for most assets. This is a game changer for STR owners who qualify to deduct significant expenses and reduce taxable income in the year property is placed into service.
What IS Bonus Depreciation - and Why STR Owners Care
Bonus depreciation for short-term rental owners has been one of the most powerful tax tools for short-term rental owners. It allowed you to deduct a major portion of property improvements and furnishings right away -- not spread out over years.
While you can't bonus depreciate the property itself, you can depreciation assets with less than a 20 year lifespan - think appliances, patios, furnishings etc.
A cost segregation can further amplify this benefit.
What Bonus Depreciation Can Mean for You
-You can deduct 100% of bonus-eligible assets in Year 1 - including furniture, appliances, and land improvements
-Cost segregation studies just got more valuable, unlocking tens of thousands in paper losses upfront
-No REPS required - STR's still benefit from the "short-term rental loophole" if average stays are 7 days or less and you materially participate
-But no retroactive changes. The new 100% rate applies only to qualifying property placed in service after January 19, 2025
The STR "Loophole" That Makes This Work
Most real estate investors can only use depreciation to offset income if they qualify as Real Estate Professionals.
But STRs are different. Thanks to a unique carveout, if your average guest stay is 7 days or less and you meet material participation requirements, you can
🔸Claim nonpassive losses
🔸Offset W-2 or other active income
🔸Enjoy huge deductions even if you're not a full-time
investor
IRS Topic No. 425 - Passive Activities - Loss Limitations
IRS Reg. §1.469-5T(a) - Defines material participation for rental activities
🎯Get the FREE STR Tax Playbook
Want to understand how bonus depreciation, material participation, and the STR loophole work together?
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✅Quick overview of STR Tax Basics
✅Entity setup tips + personal use rules
✅Cost segregation simplified
This guide is for those new to STR or leaning into learn about STR tax strategies, written in easy-to-understand terms with helpful tips borne from working with many STR investors over time and personal experience.
Kate Stoermer, STR Consultant, Coach, and Educator. Founder of The CEO Host and
Founding Member and President, Michigan Short-Term Rental Association
Looking for a Pro?
Over my time as an industry coach, consultant and educator I've come to appreciate that - no matter how much of an "expert" you are in YOUR field, we can't possibly know everything, especially as we take on a new endeavor like short-term rental investing. A big part of what I find myself doing is helping translate some of these more complex strategies so clients can confidently select or work with their chosen tax professional knowledgably - and set things up from the start with a solid foundation.
I value your time, and the time you've already spent learning in the industry. My clients aren't looking for ❌group coaching ❌generic course work - many also don't need a ❌required year-long contract for multiple thousands of dollars; I work for YOU as your consultant - whether for an hour or several over a course of weeks or months.
✅ BOOK A FREE CALL with me --lets talk about how I might be able to support you in achieving your STR goal - or just spend the 15 minutes addressing any quick questions you might have, I would be honored to help.
