Reclassification, not new deductions
A cost segregation study identifies which components of the building qualify for shorter schedules. It front-loads depreciation you'd otherwise claim over decades; it doesn't increase the total amount.
Source One Stays · Investor Guide
Cost segregation and bonus depreciation for short-term rentals
What a cost segregation study actually changes, how current bonus depreciation rules apply, and what happens at sale.
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A cost segregation study reclassifies parts of a building (certain flooring, lighting, fixtures, site improvements) out of the standard 27.5- or 39-year depreciation schedule and into 5-, 7- or 15-year schedules, which can accelerate deductions into the early years of ownership. Current law allows 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. This accelerates the timing of deductions already available to you, it does not create new ones, and any tax benefit taken early is generally recaptured at sale.
Published by Source One Stays · Updated October 5, 2026
Key rules
What the rules say
100% bonus depreciation, with conditions
Under current law, bonus depreciation applies at 100% to qualifying property acquired and placed in service after January 19, 2025. Whether a specific asset qualifies depends on its classification, not just the purchase date.
Most useful with a way to use the loss
This is most powerful when paired with a way to use the loss against active income, such as the short-stay exception or REPS. Without that, large depreciation losses on a passive rental may be limited to offsetting passive income.
This is most powerful when paired with a way to use the loss against active income, such as the short-stay exception or REPS. Without that, large depreciation losses on a passive rental may be limited to offsetting passive income.
Good to know
Common questions
Do I need a professional study?
For higher-value or multi-unit properties, a fully engineered study is generally worth it. For single properties under roughly $2 million, a simplified approach can work, but accuracy and documentation still matter if the return is ever reviewed.
Will I owe this back when I sell?
Generally yes, a portion of the accelerated depreciation is recaptured at sale, often at ordinary income rates. The appeal is the time value of having the cash now versus later, not avoiding the tax permanently.
Do all states follow the federal 100% bonus depreciation rule?
No, several states decouple from federal bonus depreciation rules, so state treatment needs separate review.
Sources: IRS Publication 946, How to Depreciate Property; IRS guidance on the additional first-year depreciation deduction.
Related guides: The STR loophole and material participation · Repairs vs. improvements · Real Estate Professional Status (REPS)
This is general information, not tax or legal advice. Every situation is different, talk with your CPA about how this applies to you.
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