Thanks to the One Big Beautiful Bill, 100 percent bonus depreciation is back for qualifying short-term rental (STR) investments placed in service after January 19, 2025, through at least 2028 and likely through 2030. That means STR buyers can deduct large chunks of their investment in year one, slashing taxes and boosting cash flow instantly.
Scenario Overview
|
Item |
Assumption |
|---|---|
|
Purchase Price |
$750,000 |
|
Down Payment (20%) |
$150,000 |
|
Mortgage Balance |
$600,000 |
|
Gross Rental Yield |
15% → $112,500 annual revenue |
|
Tax Brackets |
35% federal and 4.5% state (NC) |
How Buyer Gets Year One ROI
1. Cost Segregation and Bonus Depreciation
A cost segregation study typically reclassifies 25 to 35 percent of your property (minus land) into short-life assets.
- Building basis: $750K – 10 percent land = $675K
- Bonus eligible at 30 percent: $202,500
2. Tax Savings
- Federal: $202,500 × 35 percent = $70,875
- NC state: $202,500 × 4.5 percent = $9,112
- Total tax shield in year 1 = $79,987
3. Cash Flow and ROI
- Annual net income (simplified): $112,500 revenue minus $60,000 expenses = $52,500 net
- Add $79,987 bonus depreciation refund
- Total year one benefit = $132,487
Relative to your $150K down payment, that’s an 88 percent effective return in year one.
This does not include mortgage paydown or property appreciation.
Why It’s a Game Changer
- Instant tax relief compared to 27.5-year depreciation schedules.
- Massive cash flow boost allows reinvestment in property improvements or new deals.
- Income offset for W2 wages if you materially participate or qualify as a real estate professional.
Keys to Maximize Bonus Depreciation
-
Place the property in service before December 31, 2025
-
Do a cost segregation study targeting 20% to 35% reclassification
-
Materially participate in managing your Airbnb with average stays under 7 days to use losses against active income
-
Track income and tax brackets for precise planning — this example uses NC’s 4.5 percent flat rate
Final Word
By pairing 100% bonus depreciation, cost segregation, and active STR management, an Airbnb buyer can unlock nearly an 88% ROI on cash invested in year one.
That kind of capital efficiency, boosted by a large tax refund, gives major flexibility to reinvest, expand, or enhance your rental portfolio.
Ready to get started? Find your next STR investment property on Rabbu.
