100% Bonus Depreciation Is Back: What STR Owners Should Know

The One Big Beautiful Bill Act permanently restored 100% first-year bonus depreciation for qualifying property placed in service after January 19, 2025. For STR owners, this is a significant development worth understanding and discussing with your CPA.

What Is Bonus Depreciation?

Per IRS guidance on OBBBA provisions, bonus depreciation allows businesses to deduct a percentage of qualifying asset costs in the first year, rather than spreading the deduction over the asset's full recovery period.

The Timeline

Bonus depreciation had been phasing down: 80% in 2023, 60% in 2024, and was heading to 40%. The OBBBA reversed this. For property placed in service from January 1-19, 2025, the rate is 40%. For property placed in service after January 19, 2025, the rate is 100% — and it's now permanent.

What Typically Qualifies

Bonus depreciation generally applies to assets with a recovery period of 20 years or less, which for STR owners typically includes furniture and fixtures (5-year property), appliances and equipment (5-7 year property), certain flooring and finishes (5-year property), and landscaping and site improvements (15-year property). The building structure itself (27.5-year recovery) does not qualify — which is why cost segregation studies are valuable for identifying the portions that do. See IRS Publication 946 for detailed guidance on depreciation rules.

Why This Matters for STR Owners

When combined with a cost segregation study and (where applicable) material participation, 100% bonus depreciation may generate significant first-year paper losses. Whether and how those losses can be used against other income depends on your specific tax situation — this is an area where CPA guidance is particularly important.

Planning Ahead

If you purchased or plan to purchase an STR, discuss bonus depreciation and cost segregation timing with your CPA sooner rather than later. And track all your expenses, hours, and mileage from day one — DeductFlow makes it easy to keep everything organized throughout the year so your CPA has what they need.