How to Track Depreciation and Assets in DeductFlow

Depreciation is the largest single deduction for most STR owners—often exceeding all operating expenses combined. But it only generates a return if it's set up correctly from the start. This guide walks through adding assets, selecting the right class life, applying acceleration elections, and generating the Form 4562 support your CPA needs.

What Assets Should STR Hosts Track

Step-by-Step: Tracking Assets in DeductFlow

1. 1

   Add the Asset with Date and Cost

   Navigate to Assets > Add Asset. Enter:

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   • Description — Specific enough to identify the asset (e.g., "Samsung 65" Smart TV – Bedroom 2" not just "TV")
   • Placed-in-service date — When you first used it in the STR business (the date it was available for guest use)
   • Cost basis — Purchase price plus shipping, installation, or any costs to make it ready for use
   • Property — Which STR this asset belongs to
   • Business use % — Usually 100% for STR-specific assets; lower if you also use it personally
2. 2

   Select the Asset Class

   From the Asset Class dropdown, select:

   • Residential Real Property — 39-year, straight-line, mid-month convention; for the building itself
   • 5-Year MACRS — For personal property: appliances, furniture, carpets, electronics
   • 7-Year MACRS — For office equipment used in business operations
   • 15-Year MACRS — For land improvements: landscaping, driveways, outdoor structures

   DeductFlow automatically sets the depreciation method (200% declining balance for 5-year/7-year, 150% for 15-year, straight-line for 39-year) and convention (half-year for personal property, mid-month for real property).

3. 3

   Choose Bonus Depreciation or Section 179

   For 5-year, 7-year, and 15-year personal property and land improvements, select your acceleration election:

   • 100% Bonus Depreciation (2026) — Deduct 100% immediately (restored under the OBBBA for property acquired after Jan 19, 2025). No taxable income limitation.
   • Section 179 — Deduct up to $1,220,000 (2026 limit) of qualifying property immediately. Cannot create a loss from S179 alone.
   • MACRS Only — Standard declining balance over class life; no current-year acceleration.

   Most active STR hosts with Schedule C losses benefit most from bonus depreciation because it has no income limitation and the resulting loss can offset W-2 income if material participation is established.

4. 4

   Review the Depreciation Schedule

   Navigate to Assets > Depreciation Schedule. For each asset, verify:

   • Year 1 amount uses the half-year convention for personal property (or mid-month for real property)
   • Bonus depreciation shows as a separate line from regular MACRS
   • The remaining basis and future depreciation years look correct
   • The total current-year depreciation column matches your expectations

   This schedule is the source document for IRS Line 13. Export as PDF and share with your CPA before they complete Form 4562.

5. 5

   Handle Asset Disposition at Sale or Retirement

   When an asset is sold, traded, lost, or retired from service, navigate to the asset in your Assets list and select Mark as Disposed. Enter:

   • Disposition date
   • Sale proceeds (or $0 if abandoned/scrapped)
   • Disposition method (sale, abandonment, casualty loss)

   DeductFlow calculates: adjusted basis (original cost minus accumulated depreciation), gain or loss on disposal, and any depreciation recapture amount. These figures feed into your tax return and require Form 4797 reporting in the year of sale. Share the disposition report with your CPA.

Sample Depreciation Schedule: First-Year View

Example only. Building basis assumes $600K purchase with 20% land allocation. 2026 100% bonus depreciation rate (OBBBA) applied to 5-year and 15-year property.

Frequently Asked Questions

What assets should STR hosts track for depreciation?

STR hosts should track: (1) the rental property itself (39-year building), (2) appliances—refrigerator, washer/dryer, dishwasher (5-year), (3) furniture and furnishings—beds, sofas, tables (5-year), (4) electronics—TV, smart home devices (5-year), (5) outdoor improvements—deck, fence, landscaping (15-year), and (6) any major improvements like a new roof or HVAC system (39-year or component class as appropriate).

What is the mid-month convention for real property?

Under the mid-month convention, real property (39-year) placed in service during any month is treated as placed in service in the middle of that month. This means you get a partial year of depreciation in year one and year of sale. For example, a property purchased in October gets 2.5 months of depreciation in year one (mid-October through December).

What happens to depreciation when I sell the STR property?

When you sell a depreciated STR property, the IRS requires you to recapture the depreciation claimed under Section 1250. The gain attributable to depreciation (unrecaptured Section 1250 gain) is taxed at a maximum 25% rate rather than the lower long-term capital gains rate. Tracking your cumulative depreciation carefully—which DeductFlow does automatically—is essential for calculating your adjusted basis and the taxable gain at sale.