Unlock massive first-year depreciation deductions on your Airbnb, VRBO, or vacation rental property with an engineering-based cost segregation study.
Short-term rental properties present a unique and powerful tax opportunity. When the average guest stay is seven days or less and the owner materially participates in the rental activity, the IRS treats the income as non-passive. This distinction is critical because it allows STR investors to use accelerated depreciation deductions from a cost segregation study to offset W-2 wages, business income, and other active income sources.
Without a cost segregation study, your $500,000 vacation rental is depreciated straight-line over 27.5 years, yielding roughly $18,000 per year in depreciation. With a cost segregation study, 25-40% of that cost basis can be reclassified into 5, 7, and 15-year property, generating $75,000 to $150,000 or more in first-year deductions when combined with bonus depreciation.
Our engineering team identifies and segregates building components into the following MACRS recovery periods:
| Recovery Period | Example Components | Typical % of Basis |
|---|---|---|
| 5-Year Property | Appliances, carpeting, window treatments, specialty lighting, decorative fixtures | 15-25% |
| 7-Year Property | Furniture, outdoor equipment, security systems, specialty cabinetry | 3-8% |
| 15-Year Property | Landscaping, driveways, patios, fencing, outdoor lighting, sidewalks | 5-12% |
| 27.5-Year Property | Structural components (walls, roof, foundation) remain at standard recovery | 55-75% |
The short-term rental tax strategy has become one of the most discussed strategies in real estate investing. Here is how it works in practice: an investor purchases a vacation rental property, conducts a cost segregation study, and uses the resulting accelerated depreciation to generate a large paper loss. If the investor qualifies as a real estate professional or the property meets the short-term rental exception, this loss can offset ordinary income.
For a high-income earner with a $600,000 STR purchase, a cost segregation study might identify $180,000 in components eligible for accelerated depreciation. In the first year, this could create a tax deduction that saves $50,000 to $70,000 in federal taxes alone, depending on the investor's marginal tax bracket.
As of 2026, bonus depreciation allows investors to deduct a significant percentage of the cost of 5, 7, and 15-year property in the year the asset is placed in service. This is a time-sensitive benefit, as bonus depreciation rates have been phasing down. The sooner you conduct your study, the more you can capture.
Stratum Cost Segregation delivers your study within 14 business days so you can take full advantage of current bonus depreciation rates before they decrease further.