Recent federal legislation restored a powerful STR tax loophole, allowing short-term rental owners to take advantage of 100% bonus depreciation.
If you recently purchased a short-term rental or are considering investing in one, this creates a sizable opportunity to grow your rental business. It gives you the chance to deduct a substantial portion of property-related costs — reducing your taxable primary income and freeing up more cash to reinvest.
Evolve can be an ideal partner for owners looking to leverage these benefits. Here’s what capitalizing on the STR tax loophole entails — and how our management model can support your success.
Note: Evolve cannot provide tax advice. The information in this article is meant to help you understand general concepts that may apply to short-term rental ownership. Consult a qualified tax professional for guidance.
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In This Article:
What is 100% bonus depreciation?
How do owners qualify for 100% bonus depreciation?
Taking bonus depreciation further with cost segregation
Key takeaways
Frequently asked questions
100% bonus depreciation lets STR owners deduct the entire cost of qualifying assets in the year they’re listed for rent — instead of spreading them out over many years.
Under current legislation, the enhanced benefit will apply to assets placed in service between January 20, 2025 and December 31, 2029.
To use 100% bonus depreciation, your property must meet certain IRS requirements. The most critical are:
What does “material participation” look like? Preparing your property for guests, time spent coordinating repairs with contractors once it’s up-and-running, managing turnovers, or checking in with guests during their stays can all count.
Partnering with Evolve makes this simple. You can demonstrate active involvement in operations while we handle your booking management, pricing strategy, and guest support.
Plus, the team we put behind you includes a variety of experts, from revenue managers to customer support reps to trusted service partners. So no individual would ever contribute more than the 100 hours you do in a tax year.
This is the best of both worlds for leveraging bonus depreciation — strategic management at scale without overshadowing your role as the owner — which you generally can’t achieve with full-service property managers.
It’s also worth noting: material participation in an STR can open up more deduction opportunities for rental activities beyond bonus depreciation, but it really depends on your circumstance. Speak with a tax professional to understand the ins and outs.
💡 Keep a log of your hours, receipts, and emails to document your material participation.
While residential real estate generally depreciates on a standard 27.5-year schedule, many owners also use a cost segregation study in order to generate a loss through depreciation on shorter timelines.
Through cost segregation, the physical components of your property as well as certain improvements associated with getting your short-term rental ready to use (like renovations or new appliances) can qualify for bonus depreciation in year one.
💡 Hire specialists — a tax specialist such as a CPA, and likely a firm that specializes in cost segregation studies. Evolve has relationships in these areas, and we’re happy to refer you to trusted partners.
Bonus depreciation can be a powerful tool short-term rental owners can use to boost cash flow and make a property investment work harder from day one. Pair it with a cost segregation study, and the benefits may be even greater.
At Evolve, we can help you strike an ideal balance for leveraging this tax strategy: you stay in control of your property operations while we simplify the management side, making it easier to qualify for bonus depreciation while focusing on your growth. Connect with us today if this sounds like the partnership you’re looking for.
And if you’re on the hunt for the right property, we can help there, too. We partner at any stage of your buying journey — whether you’re still defining your business goals or ready to chat with an agent.
To reap the benefits of the STR tax loophole, you can leverage 100% bonus depreciation and maximize its impact with a cost segregation study. Work with a CPA and a firm that specializes in cost segregation studies to make sure you’re taking the appropriate steps to qualify.
100% bonus depreciation lets STR owners deduct the entire cost of qualifying assets in the year their property is listed for rent.
You or your spouse spend 100+ hours per year — and more time than anyone else — actively involved in your property operations. Time spent coordinating repairs with contractors, managing turnovers, or checking in with guests can all count. This helps qualify you for 100% bonus depreciation, and may also open up additional opportunities for deducting losses.
A cost segregation study reclassifies parts of your total property cost so those components are deductible on shorter timelines — and depreciate faster than the building itself.