Cost Segregation on a $800K Airbnb / Short-Term Rental: $192,000 in Accelerated Depreciation

An $800K short-term rental produces $192,000 in year-one accelerated depreciation, with the bulk concentrated in 5-year personal property from the furnished interior.

$192,000 Accelerated Depreciation

$71,040 Est. Year-1 Tax Savings

89x Return on Study Cost

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Property Type

Purchase Price

$71,040

Estimated Year-1 Tax Savings

$192,000

Accelerated Deductions

$795

Study Cost

89x

ROI on Study

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Estimates are for illustration only. Details

What This Means for a $800,000 Airbnb / Short-Term Rental

$800,000 Airbnb / Short-Term Rental property — cost segregation depreciation example

A short-term rental purchased for $800,000 carries a depreciable basis of approximately $640,000 after the 20% land allocation. Cost segregation reclassifies $192,000 into shorter MACRS classes. At this price point, the 5-year component is particularly significant: professionally furnished STRs contain extensive personal property including bedroom sets, living room furniture, dining sets, kitchen equipment, smart home systems, and outdoor furniture.

Under 100% bonus depreciation, the full $192,000 is deductible in year one, generating $71,040 in federal tax savings at the 37% bracket. The study costs $795, producing an 89x return. These figures reflect typical accelerated shares for furnished STR properties; actual results vary with property age, construction quality, and the scope of renovations.

Investors in this price range are frequently high-income W-2 earners using the STR material participation strategy to offset ordinary income. The IRS requires that the average guest stay be seven days or fewer and that the owner materially participates in the activity. Keeping contemporaneous logs of hours spent on STR management is advisable to substantiate the non-passive classification if audited.

MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class

$192,000 total reclassified into shorter recovery periods

5-Year Property $134,400

70%

7-Year Property $15,360

15-Year Property $42,240

22%

Estimated Year-1 Tax Savings $71,040

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

Method

Year-1 Deduction

Difference

Standard (27.5yr straight-line)

$23,273

—

With Cost Segregation + Bonus

$192,000

+$168,727

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.