The One Big Beautiful Bill (OBBB) was officially signed into law on July 4th, 2025. And for STR owners, one of the most important changes is the reinstatement of 100% bonus depreciation.
Lets taking a quick step back to understand what makes the STR tax strategy so powerful:
The Short-Term Rental Tax Strategy
There’s a unique set of rules under Section 469 of the tax code that creates a major planning opportunity for STR owners. If:
- The average stay per guest is 7 days or less, and
- The owner materially participates in the rental activity (i.e., self-manages the property by spending 100+ hours and more than anyone else, or puts in 500+ hours of valid participation time)
In simple terms, if this criteria is met, any paper losses, like those created through depreciating the property, can be used to directly offset W-2 wages or business income.
This has made STRs a strong strategy for high income earners looking to reduce their tax burden while investing in real estate.
What This Means in Practice
To illustrate how significant this change is, let’s walk through a simple example of 100% bonus depreciation vs only 40% bonus depreciation
Here’s how the numbers stack up:
As you can see, the reinstatement of 100% bonus depreciation more than doubles the available first year deduction and resulting tax savings in this scenario. For many investors, this opens the door to supercharging year one deductions and unlocking immediate cash flow and reinvestment potential.
But Watch Out for the Fine Print
One important detail in the bill is that 100% bonus depreciation only applies to property that was purchased and placed in service after January 19, 2025.
This was a dummary, for educational purposes. Read the full article here, written by Gabriel Virdaru, CPA.
