The 2026 DepreciMax STR Bonus Depreciation Study analyzed 1,717 active short-term rental listings across 197 US markets, ranking each market by median share of purchase price that qualifies for IRS §168(k) bonus depreciation. Lake Cumberland, KY leads at 27.1% — meaning a median $329,950 property generates roughly $89,400 in Year 1 federal deductions. The famous "trophy" STR markets — Aspen (14.1%), Nantucket (10.6%), the Hamptons (15.9%), Malibu (12.9%), Manhattan Beach (8.4%) — all fell below the 18% Bronze medal threshold and did not qualify for the Top 50. The reason is land value ratio: prestige lots concentrate purchase price in non-depreciable dirt.
The 2026 STR Bonus Depreciation Study was built to answer one question: which US short-term rental markets actually generate the strongest Year 1 tax profile under IRS §168(k)? The conventional wisdom in STR investing communities is that "premium markets deliver premium returns." For cash flow that's often true. For tax outcomes, the data says something almost opposite.
Over the past six months, DepreciMax scored every active listing in 197 US short-term rental markets on its bonus depreciation profile — using zip-code-level land ratios (FHFA Working Paper 19-01), state IRS §168(k) conformity data, property age, price per square foot, amenity density, and property-type classification. The result is the 2026 STR Bonus Depreciation Study — a ranked list of the 50 US STR markets with the strongest Year 1 tax profile, and a "did not make the cut" list of 147 markets that fell below Bronze.
The Top 50 is not who you'd guess.
The headline numbers
The Airbnb-listing-weighted national median across all 1,717 scored properties is 19.9% bonus-eligible — meaning the typical STR generates a Year 1 deduction equal to just under 20% of purchase price. That's a strong number in isolation, but the distribution has real spread: the 90th-percentile listing hits 23.9%, and the top-market medians clear 26%. Meanwhile, well-known destination markets like Aspen and Nantucket sit closer to the 10–15% range.
DepreciMax classifies properties into four medal tiers based on bonus-eligible share of purchase price:
- 💎 Diamond — bonus-eligible ≥ 24%
- 🥇 Gold — ≥ 22%
- 🥈 Silver — ≥ 20%
- 🥉 Bronze — ≥ 18%
- Below Bronze — unmedaled
To make the Top 50, a market's median listing had to clear the Bronze threshold — the median property in that market has to generate at least 18% of purchase price as Year 1 deduction. 50 markets cleared. 147 didn't.
Finding #1: The trophy markets flunked
This is the finding that surprised us most. The five markets in the popular imagination as the "best" places to own a short-term rental — the ones featured in Wall Street Journal STR profiles, on Airbnb's "unique stays" hero unit, in every luxury real estate podcast — mostly fall well below the Bronze medal threshold.
| Trophy Market | Median Bonus-Eligible % | Medal Tier | Rank |
|---|---|---|---|
| Manhattan Beach, CA | 8.4% | Below Bronze | Did not qualify |
| Nantucket, MA | 10.6% | Below Bronze | Did not qualify |
| Manhattan (West Village), NY | 12.0% | Below Bronze | Did not qualify |
| Martha's Vineyard, MA | 12.5% | Below Bronze | Did not qualify |
| Malibu, CA | 12.9% | Below Bronze | Did not qualify |
| Miami, FL | 13.5% | Below Bronze | Did not qualify |
| Aspen / Snowmass, CO | 14.1% | Below Bronze | Did not qualify |
| Jackson Hole, WY | 15.0% | Below Bronze | Did not qualify |
| The Hamptons, NY | 15.9% | Below Bronze | Did not qualify |
| Napa Valley, CA | 17.9% | Below Bronze | Did not qualify |
Every one of these markets has excellent cash flow potential, strong appreciation history, and enviable brand equity. What they don't have is a tax-optimized structure-to-land ratio. On a $4M Aspen home, the land itself may account for $2.4M of the purchase price — and land is not depreciable under any provision of the tax code.
Finding #2: The Top 5 are inland lakes and mountains most investors haven't heard of
The markets that actually deliver the strongest Year 1 tax profile are unglamorous. They're inland. They're often in states with full §168(k) conformity. And their median price points are dramatically lower than the trophy markets — meaning a typical investor deploying $500K–$1M can actually buy in these markets, not just visit them.
| Rank | Market | Median Bonus-Eligible % | Median Price | Median Year 1 Deduction |
|---|---|---|---|---|
| #1 | Lake Cumberland, KY | 27.1% | $329,950 | $89,416 |
| #2 | Poconos, PA | 26.7% | $669,000 | $178,623 |
| #3 | Branson, MO | 26.6% | $365,000 | $97,090 |
| #4 | Angel Fire, NM | 26.4% | $635,000 | $167,640 |
| #5 | Broken Bow, OK | 26.4% | $525,000 | $138,600 |
Notice the price gap. A median Aspen home lists around $8–12M; a median Lake Cumberland home lists at $330K. That's a 25-30× difference in ticket size — and the Lake Cumberland property generates a materially better tax profile. For an active STR investor working the STR loophole against W-2 income (see our STR loophole explainer), that's a decision-changing gap.
The full Top 50 is downloadable as a PDF. Every market includes rank, median bonus-eligible %, median price, median Year 1 deduction, tier density (what % of listings hit Diamond / Gold / Silver / Bronze), and state §168(k) conformity status. Get the full 2026 Study →
Finding #3: Land ratio sets the ceiling. Finishes decide where you land under it.
Bonus depreciation is driven by two levers that operate in sequence. The first is land value ratio — the percentage of purchase price that county assessor records attribute to land versus improvements. Because bonus depreciation can only be claimed on the structure and 15-year land improvements, land ratio sets the ceiling on how much of a purchase price is even eligible.
The second lever is finish quality and amenity density — how much of that eligible band actually converts to 5-year personal property (cabinetry, appliances, flooring, FF&E) and 15-year land improvements (pools, hot tubs, fire pits, pergolas, outdoor kitchens). Two properties with identical land ratios in the same market can land 6–10 percentage points apart on bonus-eligible share depending on how amenity-heavy the build is.
Trophy markets struggle at the first lever. Nantucket lots typically command 60–75% of purchase price — even a fully renovated Nantucket home with a pool, outdoor kitchen, and $200k in FF&E is boxed in by that geometry. On a $5M Nantucket property, only $1.25M–$2M is even eligible before finish analysis begins.
Winning markets have room at the first lever, which is why they show up in the Top 50. Lake Cumberland, Branson, and Broken Bow have inland-lake economics: buildable lots are plentiful, and county assessor records typically allocate 20–35% to land — leaving 65–80% of purchase price on the table before finish analysis. Within that band, the properties that get to Diamond (24%+) are the ones with the strongest amenity stack: heated pool, hot tub, custom outdoor kitchen, higher-end interior finishes. Properties in the same market with plainer builds land at Silver or Bronze despite the identical land ratio.
This is why market screening and per-property analysis are complementary, not substitutes. The Study tells you which markets have the ceiling to matter. A property-level report tells you where within that ceiling a specific listing actually lands — a bare-bones $500k cabin and a fully-loaded $500k cabin in the same Lake Cumberland zip code will differ by $30–50k in Year 1 deduction. For a deeper walkthrough of how land ratio dictates deduction ceilings, see Land Value Ratio: The Hidden Key to Airbnb Tax Savings.
Same budget. Same investor. Different market. The tax outcome differs by more than $36,000 in Year 1 — enough to fund the cabin's furniture and first year of operating expenses.
Finding #4: State §168(k) conformity is a hidden multiplier
Federal bonus depreciation is universal — every US-taxpayer STR investor can take it regardless of the property's state. But not every state matches that treatment on the state return. Roughly 30 states conform fully to federal IRS §168(k) — Tennessee, Florida, Texas, Kentucky, Utah, Colorado, Nevada, and others. In these states, the same Year 1 deduction that offsets your federal taxable income also offsets your state taxable income. A handful of states decouple entirely — California, New York, New Jersey, Pennsylvania, Massachusetts, Wisconsin, Oregon — and require investors to add back the federal deduction and use 27.5-year MACRS on the state return.
The magnitude matters. On a $200,000 federal deduction, a full-conformity state like Kentucky adds a state benefit of $10,000–$16,000 depending on the investor's marginal state rate. A non-conforming state contributes zero to the Year 1 pocket effect.
The 2026 Study's Top 50 skews toward full-conformity states — not because we filtered for them, but because the underlying economics that produce high bonus-eligible profiles (lower land ratios, inland geography, cabin-heavy inventory) tend to correlate with the states that also conform to federal bonus. For a full state-by-state breakdown, see our STR tax burden by state 2026 analysis.
Finding #5: Twelve emerging markets entered the 2026 sample, and Broken Bow OK debuted at #5.
The 2026 refresh added 12 markets that weren't on the 2025 list — chosen for either genuine investor interest (Broken Bow OK, Fredericksburg TX, Hocking Hills OH), rapidly growing STR supply (Traverse City MI, Door County WI, New Braunfels TX), or region-representative gaps in the prior version (Saugatuck MI, Woodstock VT, Palm Coast FL, Vero Beach FL, Prescott AZ). Camden ME was piped through but didn't clear Bronze.
Several of these debuted in the Top 10 — Broken Bow at #5 is the standout new entrant, driven by the region's cabin-heavy inventory, low land ratios, and Oklahoma's full §168(k) conformity. If you've been reading BiggerPockets threads on emerging STR markets, this list is the tax-lens overlay you should have alongside your cash-flow analysis.
Get the full Top 50 with tier density + state conformity
The complete 2026 STR Bonus Depreciation Study — all 197 markets analyzed, Top 50 leaderboard with tier density and state conformity for each, side-by-side worked examples, and methodology notes. Delivered as a PDF to your inbox.
Get the 2026 Study →How to use the Study
The Study is designed to be operational, not decorative. A few concrete ways to work with it:
- If you're market-shopping: Pull the Top 50 leaderboard and cross-reference against your cash-flow and appreciation criteria. Markets that appear on all three lists (Top 50 bonus, strong cash flow, appreciation) are the highest-conviction picks. Markets that only appear on one — treat as single-thesis bets.
- If you're evaluating a specific property: Use the market median as a screening floor. If the median in your target market is 22% bonus-eligible and your specific property is coming back at 15%, the property is 700bps below its peers — something is off (usually land ratio or age). Run a $99 DepreciMax property report to see the property-specific line-item breakdown.
- If you're a CPA advising STR clients: Use the state conformity map to model dual-benefit vs federal-only scenarios during pre-acquisition planning. The Study cites specific worked examples and the exact IRS regulation for the 7-day rule and material participation tests.
- If you're a buyer's agent: Include the market's Top 50 rank (or "does not qualify" note) in your comparative deal analysis for STR clients. Very few agents surface tax-optimized market rankings — this is a differentiator.
What the Study doesn't do
The 2026 Study estimates market-level medians and property-level scores from rudimentary signals — zip-level land ratio data, state conformity, price per square foot vs regional build cost, age, amenity density, and listing description keywords. It does not perform on-site inspections, does not analyze individual property photos, and does not produce IRS-defensible line-item cost segregation allocations.
For that, you need either (a) a formal engineered cost segregation study ($5,000–$12,000, produced by a licensed engineering firm after property acquisition) or (b) a DepreciMax property report ($99, produced from 7–9 listing photos, closely calibrated to formal cost seg outputs but designed for pre-offer screening rather than filing). Most sophisticated investors use both: DepreciMax to screen deals before offering, formal cost seg after closing to file.
Frequently asked questions
Which US market has the highest bonus depreciation potential in 2026?
Lake Cumberland, Kentucky, at 27.1% median bonus-eligible share of purchase price. A median Lake Cumberland property lists at $329,950 and generates approximately $89,400 in Year 1 federal deductions.
Why didn't Aspen or Nantucket make the Top 50?
Both markets have such high land value ratios that the majority of a typical purchase price is non-depreciable dirt. Aspen's median bonus-eligible share is 14.1%, Nantucket's is 10.6% — both well below the 18% Bronze medal threshold. Trophy real estate is optimized for appreciation and prestige, not for the tax code.
How many listings did the Study analyze?
1,717 individual active short-term rental listings across 197 US markets. 186 of those markets had a large enough sample (n≥5 scored listings) to receive a full score; 50 earned a published rank in the Top 50 leaderboard.
Is the Study a substitute for a formal cost segregation study?
No. The Study estimates market-level medians and property-level scores using rudimentary signals. A formal engineered cost seg (typically $5,000–$12,000) is required for any IRS-defensible filing. DepreciMax property reports ($99) sit in between — AI photo analysis producing per-property line-item estimates closely calibrated to formal cost seg outputs, designed for pre-offer screening.
How often is the Study updated?
Full methodology revisions are annual. Market rankings and medal thresholds are re-run quarterly as new active listings enter the sample. The current version is methodology 1.1, snapshot date 2026-07-18. State §168(k) conformity is monitored continuously and updated within 30 days of any state law change.
This article summarizes findings from the 2026 DepreciMax STR Bonus Depreciation Study. Estimates are prospecting-grade and not a substitute for a formal engineered cost segregation study or tax advice from a qualified CPA. Tax laws change frequently. Consult a qualified CPA or tax attorney before implementing any tax strategy.