2026 is a huge year for rental property investors. Bonus depreciation is back at 100% thanks to recent legislation, and if you've been sitting on the sidelines waiting for the right time to do a cost segregation study, this is it. Here's everything you need to know about how to make the most of this window before it potentially closes.
What Is Bonus Depreciation?
Let's start with the basics. Normally when you buy a rental property, you write off the building structure over a really long time: 27.5 years if it's residential, or 39 years if it's commercial. That's called straight-line depreciation, and it's useful, but it spreads your deductions out over decades. Bonus depreciation works differently. It lets you deduct certain property components—the ones classified as 5-year, 7-year, or 15-year property under MACRS—immediately in Year 1. At 100%, you get the ENTIRE deduction upfront, not in tiny annual pieces.
Here's why that matters: Imagine you buy a $500K rental property and a cost segregation study reclassifies $100K of the basis into accelerated property categories. With bonus depreciation at 100%, you'd claim $100K in deductions in Year 1 instead of spreading them across 5, 7, or 15 years. That's serious tax savings happening right now, when you need it most.
The Bonus Depreciation Timeline
To understand why 2026 is special, you need to know the recent history. The Tax Cuts and Jobs Act of 2017 introduced 100% bonus depreciation and extended it through 2022. It was a massive win for real estate investors. But Congress didn't make it permanent. Starting in 2023, the rate started declining: 80% in 2023, 60% in 2024, 40% in 2025. The trajectory was heading downward, and many investors thought they'd missed their opportunity.
Then in 2026, new legislation restored bonus depreciation back to 100%. This is not a guarantee it stays forever. Congress could change it again. But right now, you've got the full benefit available. The smart move—the only move, really—is to act now while the full deduction is available. Every month you wait is money left on the table.
Why This Matters for STR Investors Specifically
If you own short-term rentals, you've got two unique advantages that make 2026 extra special. First, short-term rentals contain WAY more depreciable components than standard long-term rentals. We're talking furniture, electronics, hospitality-grade fixtures, outdoor entertainment areas, pools, hot tubs, alarm systems, smart home tech, kitchen equipment, and more. While a typical long-term rental might have 10-15% of its purchase price in accelerated categories, a well-equipped STR often has 20-30%. That's double or triple the deductions.
Second, STR investors can often claim material participation status, which is a game-changer. This allows you to offset rental losses against your active income—your W-2 job, your business income, whatever. Regular rental investors are limited to $25K of passive loss deductions per year. Not you. The combination of 100% bonus depreciation, cost segregation, and material participation is honestly the most powerful tax strategy in real estate right now. And 2026 is when all three elements are firing on all cylinders.
What Qualifies for Bonus Depreciation?
Not everything in your property qualifies. The IRS has specific rules. Any property component with a MACRS recovery period of 20 years or less qualifies for bonus depreciation. In practical terms, this includes 5-year personal property like appliances, flooring, cabinetry, fixtures, and furniture. It includes 7-year property like certain fixtures and equipment. And it includes 15-year land improvements such as fencing, landscaping, paving, pools, outdoor lighting, and decks.
What doesn't qualify? The building structure itself. That 27.5-year or 39-year asset stays on straight-line depreciation. But here's the thing: most investors have no idea how much of their property actually falls into these shorter categories. That's what a cost segregation study does. It forensically identifies and reclassifies these components so you can claim every dollar you're entitled to.
New Construction vs. Existing Properties
Good news: bonus depreciation works for both. If you bought or built a property in 2026, you apply the cost segregation study to your new acquisition and claim bonus depreciation on Year 1. But here's the amazing part: if you bought a property three years ago, five years ago, or even ten years ago and never did a cost seg study, you can do what's called a "lookback" study and catch up on all the missed accelerated depreciation in a single year through Form 3115.
You don't even need to amend your prior returns. The lookback strategy lets you claim years of missed deductions in one lump sum. This is one of the most underused strategies in real estate investing. Investors sit on properties they bought years ago, leaving hundreds of thousands in tax savings on the table, simply because they didn't know this was an option. If this is you, 2026 is your wake-up call.
The Numbers: A Quick Example
Let's make this concrete. Say you bought a $750K vacation rental property in 2024 and finally did a cost segregation study in 2026. The study reclassifies $90K to 5-year property and $45K to 15-year property. That's $135K total in assets eligible for bonus depreciation. With the rate at 100%, you claim the full $135K as a deduction in Year 1.
At a 37% tax bracket, that $135K deduction saves you approximately $50,000 in actual cash taxes. The cost segregation study itself? Typically runs $895 to $1,195, depending on whether you want a full FF&E analysis. That's roughly a 40-55x return on investment. And that's conservative—many investors are in higher brackets or have other tax considerations that amplify the benefit.
What Happens If You Wait?
Bonus depreciation at 100% is not guaranteed beyond 2026. Congress could change the rules. They've done it before. Even if the rate stays at 100%, you're literally losing a full year of accelerated deductions for every year you delay. A property purchased in 2025 that gets studied in 2027 loses the ability to claim 2025 and 2026 deductions. That's not getting them back; that's just gone.
There's literally no financial reason to wait if you own rental property. The study pays for itself many times over. The only cost is the cost of the study itself. There's no additional tax liability. The only risk is the risk of Congress changing the rules, which is another reason to move now rather than later.
How to Get Started
You don't need to hire a $5,000 engineering firm or wait six weeks for results. Cost Seg Smart delivers engineering-based, IRS-compliant cost segregation studies within 24 hours. It's straightforward: enter your property details, check out, and get a CPA-ready PDF report that your tax professional can use immediately. No gatekeeping. No upsells. Just the study you need, when you need it.
The Bottom Line
2026 is the year. 100% bonus depreciation is available right now. Cost segregation studies are more accessible than ever. And every month you wait is money left on the table. If you own rental property—especially short-term rentals—talk to your CPA, get your cost segregation study done, and put that cash back to work in your next property. This window won't stay open forever.