Introduction
When the One Big Beautiful Bill was signed into law in 2025, it brought back something short-term rental investors had been eagerly waiting for: the return of 100% bonus depreciation. For the first time since 2022, owners of vacation rentals can once again use a cost segregation study to write off a large portion of their property’s value in the very first year it’s placed into service.
This change has generated a wave of excitement among Airbnb and short-term rental hosts who see the opportunity for massive upfront tax savings. But here’s the catch: not everyone qualifies. While the bill reopened the door to one of the most powerful tax strategies in real estate investing, there are still strict rules around ownership, participation, and timing.
That’s why it’s just as important to know who doesn’t qualify as it is to understand who does. In this article, we’ll break down the key scenarios that can disqualify you from claiming bonus depreciation on your STR in 2025 — and explain the deadlines you’ll need to hit if you’re planning to buy your next property this year.
Not sure if you qualify? Connect with a Chalet Bonus Depreciation Specialist for a free consultation and get clarity before tax season.
Who Does Not Qualify for 100% Bonus Depreciation
1. Average Guest Stay Longer Than 7 Days
If the average stay at your property is more than 7 days, the IRS may not treat it as a short-term rental business. Instead, it could be categorized as a traditional rental activity, which disqualifies you from using bonus depreciation to offset active income unless you provide substantial services to guests.
2. You Don’t Own the Property
Only legal property owners qualify. If you lease a property or own shares in a co-op instead of holding direct title, you cannot use cost segregation or bonus depreciation.
3. Excessive Personal Use
If you personally use the property for more than 14 days per year or more than 10% of the total days it’s rented, the IRS considers it a personal-use property. That disqualifies it from bonus depreciation.
Airbnb Rental Markets Set to Outperform in 2025
Download our comprehensive guide to learn:
- 📊 Which STR markets are set to outperform in 2025 based on revenue growth, occupancy trends, and supply shifts.
- 🏡 Where home prices are still affordable while generating high rental income.
- ⚖ Which cities have the best (and worst) STR regulations—so you don't get caught off guard.
- 🔎 The demand trends driving guest bookings and what amenities maximize revenue in each market.
4. Mixed-Use Properties Without Clear Allocation
If your STR is part of your primary residence (e.g., you rent out a spare room or basement), only the rented portion may qualify. Failing to properly allocate by square footage or rental days can prevent you from taking the deduction.
5. Improvements That Don’t Qualify
Not all improvements can be depreciated under this rule. Land, building structures, roofs, and other major components are excluded. Bonus depreciation only applies to personal property and improvements with a useful life of 20 years or less.
6. Property Price is Too Low
Investors should carefully weigh whether the tax savings will outweigh the study cost. Many tax specialists advise waiting until you scale up to larger properties or bundle multiple smaller ones into one study. Smaller or lower-priced properties often have fewer eligible components (appliances, flooring, fixtures, parking, etc.) too. However, even if your investment is below $300,000, which is considered a common threshold when to consider doing a study, we would still recommend consulting with our specialist to get a free estimate on your investment.
Timing: When Must an STR Be Placed in Service to Qualify in 2025?
The timing of when your property is considered “in service” is crucial. To qualify for the 2025 bonus depreciation:
- The STR must be placed in service on or after January 19, 2025.
- “Placed in service” means the property is ready and available for guests — typically the date it’s listed for rent, not just when you close on the purchase.
- To claim the deduction for 2025, your property must be in service before December 31, 2025.
Need help planning the placed-in-service date for your next STR? Book a free consultation with a Chalet Bonus Depreciation Specialist.
Final Thoughts
The return of 100% bonus depreciation under the One Big Beautiful Bill is a huge opportunity for real estate investors, but it comes with strict boundaries.
If your property has long-term guests, you don’t materially participate, or you use it too much personally, you won’t qualify. Likewise, the timing of when your STR is placed into service makes all the difference in whether you can leverage this powerful tax tool for 2025.
For investors who do qualify, pairing cost segregation with bonus depreciation can unlock massive upfront savings and free up capital for reinvestment. But for those who fall into the disqualified categories, it’s important to plan ahead, adjust your strategy, or work closely with a tax professional to avoid costly mistakes.
