Short-term rentals
Cost segregation for Airbnb and VRBO homes
Furnished, amenity-heavy vacation homes carry more short-life property than any other house. Pair a study with the short-term rental rules and the first-year loss can reduce taxes on your salary.
What usually moves to 5 and 15 years
Typical range: 27–38% of depreciable basis.
- Furniture, decor and electronics included in the purchase
- Appliances, including outdoor kitchens and wine fridges
- Hot tubs, saunas and plunge pools that aren't built into the structure
- Decks, patios, fire pits, pergolas and outdoor lighting
- Game room fixtures, specialty lighting, smart locks and cameras
- Removable flooring, window treatments and decorative finishes
Worked example
Furnished 3-bed vacation home
In service April 2026, 35% federal bracket
| Purchase price | $650,000 |
| Less land | ($110,000) |
| Plus renovations | $30,000 |
| Depreciable basis | $570,000 |
| Year-one depreciation, no study | $10,353 |
| Year-one depreciation, with a study | $161,457–$223,019 |
| Estimated tax savings | $52,887–$74,433 |
Illustration computed with our calculator, not a client result. Express Study fee from $895. Assumes the loss is usable this year.
The 7-day test and the 100-hour test
If your average guest stay is 7 days or less, the rental is not a passive "rental activity". Materially participate (most hosts use the test of more than 100 hours and more than anyone else) and the loss can offset W-2 and business income. Log your hours as you go.
27.5 or 39 years
Most CPAs place short-term rentals on the 39-year schedule because most stays are shorter than 30 days. Some use 27.5 for a single house. Either way, year one barely moves, because bonus depreciation covers the 5- and 15-year parts.
Personal use
Stay there more than 14 days, or 10% of rented days if that is more, and the home becomes a residence for tax purposes, with losses capped at rental income.
Run your own numbers
Estimated tax savings on your 2026 return
Example property$48k – $68k
From $151k–$213k of extra depreciation, compared with $10,353 without a study.
| Depreciation | 2026 deduction | 5 years |
|---|---|---|
| No study | $10,353 | $68,814 |
| With a study, low | $161,457 | $204,134 |
| With a study, high | $223,019 | $259,265 |
Where your $570,000 of basis goes with a study
- 5-year items
- $131,100
- 15-year site work
- $85,500
- 39-year building
- $353,400
Express Study from $895
About 65× its cost in year one
- Uses 100% bonus depreciation, available for homes bought and placed in service after Jan 19, 2025.
- Short-term rentals with an average stay of 7 days or less can offset W-2 income if you materially participate (often 100+ hours and more than anyone else).
Questions
Can these losses offset my W-2 income?
Not automatically. Rental losses are passive by default, so they offset passive income first and carry forward if unused. There are three ways to use them against wages.
First, the short-term rental route: if the average guest stay is 7 days or less and you materially participate (commonly 100+ hours and more than anyone else, cleaners included), the activity is not treated as passive.
Second, real estate professional status: more than 750 hours a year and more than half your working time in real estate, plus material participation in the rentals.
Third, the $25,000 allowance for active landlords, which phases out between $100,000 and $150,000 of modified adjusted gross income. Your CPA decides which applies to you.
Does a short-term rental use 27.5 or 39 years?
The 27.5-year life is for buildings that earn at least 80% of rent from dwelling units, and a unit rented mostly on a transient basis (mostly stays of less than 30 days) doesn't count as a dwelling unit. Many CPAs therefore put Airbnb-style rentals on 39 years.
Others use 27.5 years for a single house on the view that the transient rule targets hotel-like establishments. Practitioners disagree. Our calculator defaults short-term rentals to 39 years and lets you switch. The difference to your first-year savings is small either way.
What's the deal with 100% bonus depreciation?
The One Big Beautiful Bill Act, signed July 4, 2025, made 100% bonus depreciation permanent for property acquired and placed in service after January 19, 2025. Only the 5-, 7- and 15-year parts a study identifies qualify; the building itself never does.
Homes under a binding purchase contract before January 20, 2025 keep the older phase-down: 60% if placed in service in 2024, 40% in 2025, 20% in 2026. You can also elect out of bonus by asset class if a smaller first-year deduction suits your plans better.
What happens when I sell? Do I pay it all back?
Some of it. On a taxable sale, depreciation on the 5-year parts is recaptured as ordinary income, and depreciation on the building and site work is taxed at up to 25%. Recapture only applies to gain; if you sell at a loss there is nothing to recapture.
Even so, a deduction today at 32–37% that's repaid years later is usually worth more than the same deduction spread over 27.5 years. You can also defer with a 1031 exchange, and heirs receive a stepped-up basis that wipes out recapture. If you expect to sell within two years, a study may not pay off. Ask us and we'll model it.
Find out what your rental is worth on this year’s return
A free proposal with your estimated savings and a fixed fee, usually within one business day. Studies start at $895.