VaultSTRWhere the law stands in 2026
After years of phase-down whiplash — 100% under the 2017 tax act, then 80% in 2023, 60% in 2024, and 40% for early 2025 — the 2025 tax act restored 100% bonus depreciation permanently for qualifying property acquired and placed in service after January 19, 2025. For anyone buying a short-term rental in 2026, that means the accelerated portions of the purchase deduct in full, in year one.
Two dates matter: acquired (contract binding) and placed in service (ready and available for guests). Both generally need to fall after the January 19, 2025 line to get 100% rather than a phase-down rate — a detail worth confirming with your CPA on any deal that straddled it.
What qualifies — and what never does
Bonus depreciation applies to property with a recovery period of 20 years or less. On a rental, that means: 5-year property (appliances, carpet, furniture, window treatments — fat categories in a furnished STR), 7-year property (certain equipment and fixtures), and 15-year land improvements (decks, patios, fencing, driveways, landscaping, the hot tub pad).
The building itself — 27.5-year residential or 39-year nonresidential — never qualifies, and neither does land. Used property qualifies just like new, as long as it’s new to you. That asymmetry is the entire reason cost segregation studies exist: without one, nearly everything you paid sits in the slow bucket.
The math on a real deal shape
Take a $650,000 cabin — roughly the shape of the median deal in our underwritten inventory. Allocate $130,000 to land, leaving $520,000 of building basis. A cost segregation study reclassifies 28% — about $145,000 — into 5-, 7-, and 15-year property, all bonus-eligible at 100%. Add a $40,000 furnishing budget (5-year property, fully bonus-eligible without any study).
Year-one depreciation: roughly $185,000 of accelerated deductions plus regular straight-line on the remaining building. At a 35% marginal rate, that’s about $65,000 of federal tax deferred — against a study fee of $3,000–$5,000. The catch, as always: those losses only offset W-2 and business income if you clear the short-term rental loophole’s two tests or hold real estate professional status.
Bonus vs. Section 179: which lever when
Section 179 expensing covers similar ground with different rules: it’s capped (the 2025 act raised the limit to $2.5 million with a $4 million phase-out), it can’t create a loss beyond business income, and it doesn’t apply to most residential rental property. Bonus depreciation has no dollar cap and can create losses — which is exactly what the STR strategy needs.
Practical answer for most STR buyers: bonus does the heavy lifting; 179 occasionally helps operators with other business income expensing specific equipment. Your CPA picks the mechanism line by line — your job is keeping the receipts.
Three mistakes that eat the benefit
Buying the deduction instead of the deal. A property that doesn’t cash flow is a bad purchase with a discount. Underwrite first — the pro forma builder models the deal with zero tax benefit, which is how it has to work on its own. Missing the placed-in-service date. A December closing that isn’t guest-ready until January moves the deduction a full tax year. Skipping the study on a qualifying property. Self-estimating component values invites audit trouble; an engineering-based study is the standard that holds up.
Put this to work
Three ways to move from reading to doing: browse today’s underwritten deals and get three more in your inbox every morning via the Daily Deal newsletter below; run your own numbers in the free pro forma builder or revenue calculator (unlocking the full report creates your free VaultSTR account); or tell our desk what you’re looking for and we’ll point you to a vetted agent and the right tools for your situation.
Bottom line
Bonus depreciation at a permanent 100% is the strongest it has ever been for rental investors, and short-term rentals — furnished, amenity-heavy, often self-managed — are unusually well positioned to use it. The building never qualifies; everything short-lived does; cost segregation is how you find it.
This article is research, not tax or legal advice. Thresholds, elections, and documentation requirements depend on individual facts — involve a CPA who works with short-term rentals before acting on any of it.