Thanks to the One Big Beautiful Bill, 100 percent bonus depreciation is is now permanent under the One Big Beautiful Bill for qualifying short-term rental (STR) investments acquired and placed in service after January 19, 2025.
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 by December 31 to claim the deduction on that year's return
-
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.
