Bonus Depreciation Is Back — Here’s What Real Estate Investors Need to Know
It’s official: As of July 4, 2025, 100% bonus depreciation has been fully reinstated for qualifying assets acquired and placed into service after January 19, 2025 and before Jan 1, 2030. This is a major win for real estate investors looking to maximize their tax efficiency.
But there’s a catch: only assets purchased after January 19, 2025 are eligible. Even if you place the asset into service after that date, you won’t qualify if the asset was purchased before it. The timing matters—and so does your planning.
Why This Matters for Short-Term Rental Investors
This tax change couldn’t have come at a better time for short-term rental (STR) investors. When combined with the STR loophole—which can allow certain investors to use real estate losses against active income—100% bonus depreciation becomes a powerful tool for reducing your tax bill.
This creates a unique window of opportunity:
➡️ Buyers can realize huge first-year tax savings.
➡️ Sellers can benefit from renewed buyer demand and improved pricing power.
Whether you're repositioning your portfolio or looking to exit at a strong valuation, the next 6–12 months could bring a wave of movement in the STR market.
💡 Case Study: Buying a $700K Short-Term Rental in Atlanta
Let’s say an investor buys a $700,000 fully furnished STR in Atlanta in August 2025, after the 1/19/25 eligibility window begins. The property qualifies for cost segregation and bonus depreciation.
Purchase Price: $700,000
Land Value (non-depreciable): $150,000
Depreciable Basis (Building + FF&E): $550,000
Cost Segregation Results: ~25% of basis allocated to 5-, 7-, and 15-year property = $137,500 eligible for 100% bonus depreciation
Bonus Depreciation Deduction (Year 1): $137,500
If STR Loophole Applies: That deduction could offset W-2 or active income in the same tax year.
If the buyer is in a 37% federal tax bracket, this could mean up to $50,875 in federal tax savings—just from accelerated depreciation in Year 1.
Final Thoughts
The return of 100% bonus depreciation—paired with STR loophole eligibility and investor-friendly tax strategies—makes now an excellent time to buy or sell short-term rentals. Whether you're planning to grow your portfolio or exit a property, this tax tailwind could reshape the market in 2025 and beyond.
Disclaimer: I am not a CPA or tax advisor. This is not tax advice. Always consult with your accountant or financial professional before making any investment or tax decisions.
