Cost Segregation on a $450K Airbnb / Short-Term Rental: $108,000 in Accelerated Depreciation

A $450K short-term rental generates substantial accelerated depreciation, driven by fully furnished interiors and the higher personal-property share typical of STR properties.

$108,000 Accelerated Depreciation

$39,960 Est. Year-1 Tax Savings

50x Return on Study Cost

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Property Type

Purchase Price

$39,960

Estimated Year-1 Tax Savings

$108,000

Accelerated Deductions

$795

Study Cost

50x

ROI on Study

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Estimates are for illustration only. Details

What This Means for a $450,000 Airbnb / Short-Term Rental

$450,000 Airbnb / Short-Term Rental property — cost segregation depreciation example

At $450,000, a short-term rental has an estimated depreciable basis of $360,000 (80% after land allocation). STR properties carry a higher concentration of 5-year personal property than unfurnished rentals — furniture, appliances, decorative lighting, linens, electronics, and kitchen equipment all qualify. Cost segregation reclassifies $108,000 into accelerated MACRS classes, primarily 5-year and 15-year property.

With 100% bonus depreciation, the full $108,000 is deductible in year one, generating $39,960 in federal tax savings at the 37% bracket. The study costs $795, resulting in a 50x return. These figures assume standard construction and furnishing levels; actual reclassification amounts vary based on age, renovations, and construction costs.

STR investors who materially participate in the rental activity (100+ hours annually, more than any other individual) may treat the income and losses as non-passive under IRS rules. This allows the accelerated depreciation to offset W-2 and other ordinary income — a distinction that does not apply to traditional long-term rentals, where passive loss limitations restrict the current-year deductibility.

MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class

$108,000 total reclassified into shorter recovery periods

5-Year Property $75,600

70%

7-Year Property $8,640

15-Year Property $23,760

22%

Estimated Year-1 Tax Savings $39,960

Illustrative estimate. Final allocations vary based on property facts and report findings.

Method

Year-1 Deduction

Difference

Standard (27.5yr straight-line)

$13,091

—

With Cost Segregation + Bonus

$108,000

+$94,909

Estimated deduction based on typical cost segregation allocations for airbnb / short-term rental properties. Actual study results may vary based on property-specific analysis including age, condition, renovations, and local construction costs.

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Why Cost Segregation Works for Short-Term Rentals

Short-term rentals contain a higher concentration of depreciable personal property than almost any other residential property type. Furniture, appliances, linens, kitchenware, electronics, decorative fixtures, and specialty items like hot tubs or game room equipment all qualify as 5-year property under the IRS MACRS classification system. This furniture, fixtures, and equipment (FF&E) component typically represents 15-20% of the depreciable basis.

Beyond interior components, site improvements add additional reclassification value. Driveways, walkways, patios, outdoor lighting, fencing, landscaping, and irrigation systems fall into the 15-year MACRS class rather than the default 27.5-year residential schedule. For STR properties with pools, outdoor kitchens, or fire pits, these components can represent a meaningful share of the total reclassified amount.

With 100% bonus depreciation permanently restored under the One Big Beautiful Bill Act (signed July 2025), every dollar reclassified into 5-year, 7-year, or 15-year MACRS classes is deductible in full in the first year. For STR owners who materially participate in their rental operation, these accelerated deductions can offset W-2 and business income — not just passive rental income.

Who This Example Applies To

Airbnb, Vrbo, or short-term rental property owners
Investors who materially participate in their STR operation (100+ hours/year)
Taxpayers in the 32-37% federal bracket (where savings are most significant)
Properties with furniture, appliances, and guest-ready finishes

If your property is a passive investment managed entirely by a third party, the accelerated depreciation may only offset passive income. If your property has minimal furnishings or you plan to sell within 1-2 years, the benefit may be reduced. Actual results vary based on property age, condition, renovations, and local construction costs.

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Compare: Airbnb / Short-Term Rental at Different Price Points

Price	Accelerated	Tax Savings	Study Cost	ROI
$300K	$72,000	$26,640	$795	34x
$500K	$120,000	$44,400	$795	56x
$750K	$180,000	$66,600	$795	84x
$1M	$240,000	$88,800	$1,195	74x
$400K	$96,000	$35,520	$795	45x
$600K	$144,000	$53,280	$795	67x
$1.5M	$360,000	$133,200	$1,195	111x
$450K	$108,000	$39,960	$795	50x
$700K	$168,000	$62,160	$795	78x
$800K	$192,000	$71,040	$795	89x

Frequently Asked Questions

What is a cost segregation study? ▼

A cost segregation study is an engineering-based analysis that reclassifies components of your property into shorter IRS depreciation categories (5, 7, and 15 years) instead of the default 27.5 or 39 years. This accelerates your depreciation deductions, reducing your tax bill in the early years of ownership.

Why do Airbnbs get higher cost segregation deductions? ▼

Short-term rentals are typically furnished with furniture, appliances, electronics, linens, kitchenware, and décor — all of which qualify as 5-year personal property under MACRS. This FF&E (furniture, fixtures, and equipment) often represents 15-20% of the property's depreciable basis, significantly increasing the accelerated depreciation amount compared to unfurnished long-term rentals.

What is material participation and why does it matter? ▼

Material participation means you're actively involved in your rental operation — managing bookings, communicating with guests, coordinating maintenance, and making business decisions. If you spend 100+ hours on these activities and nobody else spends more time than you, the IRS treats your rental as non-passive. This allows you to deduct the accelerated depreciation against your W-2 or business income, not just rental income.