Trump's Bill Makes Permanent Bonus Depreciation for Short-Term Rental Investors

President Trump's Big Beautiful Bill, enacted last summer, made permanent a tax break that lets qualifying short-term rental owners deduct a large share of a property's cost from their ordinary income. The change restored full bonus depreciation, which had begun phasing out after the 2017 tax law.

A cost-segregation study typically isolates about one-third of a home's value for immediate deduction.

For a $450,000 house on a $50,000 lot, that produces roughly $150,000 in first-year depreciation, cutting taxes by $55,000 for someone in the top bracket, according to CPA Ryan Bakke. One BNBCalc customer bought about $30 million in homes in late 2025 to offset nearly all of an eight-figure tax bill, co-founder Jeremy Werden said.

After the bill passed, 30% to 40% of BNBCalc's new customers cited the tax savings as their reason for using the service.

Owners must satisfy the material participation test: either 500 hours a year managing the property or portfolio, or more than 100 hours with no one else spending more time. Average guest stays must be seven days or less. The deduction is a deferral; taxes are recaptured on sale unless a 1031 exchange is used.

Michael Chang, who runs STR Like the Best, said the permanence of the rule encourages investors to build systems and knowledge. A Florida investor sold another property to buy a larger short-term rental after the bill restored full bonus depreciation. Bakke described two doctors earning about $500,000 who viewed a single $300,000 cabin as a retirement plan.

He noted that all eight of his audited clients using the strategy prevailed because they maintained detailed records, though he has turned away others whose documentation was inadequate. Bakke also recounted a client who saved $60,000 in taxes but lost $3,500 a month on a poorly chosen property and sold at a loss.