Depreciating Renovations and Improvements to Your STR

Capital improvements to your STR must be depreciated over time—they cannot be deducted in full the year you pay for them, unlike ordinary repairs and maintenance. Under IRC §263 and §168, structural improvements are depreciated over the building's recovery period (27.5 or 39 years, depending on how your CPA classifies the STR), land improvements over 15 years, and personal property (appliances, equipment) over 5 years with 100% bonus depreciation available in 2026.

Capital Improvement vs. Repair: The Critical Distinction

Not every dollar you spend on your STR property is a capital improvement. The IRS distinguishes between repairs (fully deductible in the year incurred) and improvements (must be capitalized and depreciated). The general rule under the Tangible Property Regulations (Treas. Reg. §1.263(a)-3):

• Repairs and maintenance: Deductible immediately. Fixing a broken window, patching drywall, touching up paint, unclogging a drain.
• Capital improvements: Must be capitalized and depreciated. Work that betters, restores, or adapts a unit of property to a new or different use.

Recovery Periods for Common STR Improvements

If your CPA depreciates the STR building over 39 years, interior work such as a kitchen or bathroom remodel may instead be 15-year Qualified Improvement Property (QIP), which is eligible for bonus depreciation. Roofs and enlargements never are.

Structural Improvements: 27.5- or 39-Year Schedule

Structural improvements are depreciated over the same period as the original building: 27.5 years for residential rental property, or 39 years if your CPA treats the STR as non-residential because it is rented mostly to short-stay guests. These are improvements that become part of the building structure or its integrated systems.

Land Improvements: 15-Year Schedule with Bonus Depreciation

Improvements to the land surrounding your STR—decks, patios, driveways, fencing, landscaping, outdoor pools—are generally 15-year land improvements and qualify for 100% bonus depreciation in 2026. This is one of the highest-leverage categories for STR renovations because you can deduct the full cost immediately.

Appliances and Personal Property: 5-Year with Bonus

When you renovate, pay close attention to appliances and personal property items installed as part of the project. These should be separated from the structural work on your invoices and depreciated at their shorter 5-year life with bonus depreciation available.

Partial Disposition Election When Replacing Components

When you replace a structural component (a roof, HVAC system, windows), you can make a partial disposition election under Treas. Reg. §1.168(i)-8 to write off the remaining undepreciated basis of the old component immediately. This is covered in detail in our guide to partial disposition elections.

Disclaimer

This article is for informational purposes and does not constitute tax, legal, or financial advice. Tax rules vary based on your specific situation, filing status, entity structure, and jurisdiction. Always consult a qualified CPA or tax professional for guidance on your specific tax situation. IRS rules and thresholds are subject to change—verify current requirements at irs.gov before filing.

Frequently Asked Questions

Can I deduct the full cost of a kitchen remodel in my STR in the year I pay for it?

Generally no — a kitchen remodel is a capital improvement under IRC §263, which means you must depreciate it over time rather than deducting the full cost immediately. A kitchen remodel that adds to or substantially improves the building structure is typically depreciated over the building's recovery period: 27.5 or 39 years, depending on how the property is classified (on a 39-year STR, interior work may qualify as 15-year QIP). However, new appliances installed during the remodel are 5-year MACRS property and qualify for 100% bonus depreciation.

What is Qualified Improvement Property (QIP) and does it apply to my STR?

Qualified Improvement Property (QIP) is any improvement to the interior of a non-residential building placed in service after the building was first placed in service. QIP is 15-year property eligible for bonus depreciation, but it applies only to non-residential real property. If your STR is classified as 27.5-year residential rental property, QIP does not apply and interior improvements follow the 27.5-year building schedule. If your CPA classifies the STR as 39-year non-residential property, as many do for homes rented mostly to short-stay guests, interior improvements may qualify as QIP, excluding enlargements, elevators and escalators, and the internal structural framework. Use the classification your CPA puts on the return.

What recovery period applies to a new roof on my STR?

A new roof is a structural improvement to your STR building and is depreciated over the building's recovery period: 27.5 years if the STR is classified as residential rental property, or 39 years if your CPA treats it as non-residential (common for homes rented mostly to short-stay guests). However, when you install a new roof, you can make a partial disposition election to write off the remaining undepreciated basis of the old roof immediately, which can reduce the net cost significantly.

How are new appliances treated when I renovate my STR?

New appliances (refrigerators, dishwashers, washers, dryers, microwaves) are 5-year MACRS personal property regardless of when they are installed. They qualify for 100% bonus depreciation in 2026, allowing you to deduct their full cost in the year they are placed in service — separate from the structural renovation costs.