How to Determine Land Value for Depreciation (Airbnb, 2026)

The "30% land, 70% building" split is one of the most durable myths in short-term rental tax planning. It gets repeated on forums, in podcasts, and occasionally by CPAs who should know better. Investors plug it into underwriting spreadsheets. Buyers use it to model Year 1 deductions. Sellers cite it when negotiating.

None of that changes the fact that no such rule exists in the tax code. The IRS requires a reasonable allocation of purchase price between land and depreciable improvements based on the fair market value of each — not a fixed percentage. The right number for your Airbnb might be 8% or 45%. For a primer on how land ratio affects tax savings across markets, we have a companion article — but if you're here you already know the concept and want the workflow.

Where the "30% Rule" Came From (And Why It's Wrong)

The 30/70 allocation traces back to a shortcut used decades ago by some CPAs when assessor data was hard to pull manually. It was never IRS guidance — just a middle-of-the-road number unlikely to draw scrutiny in the pre-audit-analytics era.

The rule the IRS actually applies is different. Treasury Regulation §1.167(a)-2 is explicit: depreciation "applies only to that part of the property which is subject to wear and tear, to decay or decline from natural causes, to exhaustion, and to obsolescence." Land is not subject to any of those things and is not depreciable — full stop. The regulation offers no percentage safe harbor.

The companion regulation, §1.167(a)-5, tells you how to allocate when you buy land and improvements for a single price: the purchase price is "apportioned between the land and the depreciable property" based on their respective fair market values. No percentages. Fair market value.

Any single-percentage rule fails because land value is driven by scarcity and location, and both vary enormously across US STR markets. A downtown Nashville STR sits on a small parcel where the dirt is worth as much as the building. A three-acre cabin in the Smokies sits on land nearly free relative to a $700k log structure. Applying 30% to both is guaranteed to be wrong for both.

How to Determine Your Property's Actual Land Value

There is a three-method hierarchy that CPAs and cost segregation firms use to establish a defensible land allocation. Ranked from most to least authoritative:

Method 1: Purchase Price Allocation in the Contract

The strongest allocation is one the buyer and seller agree to in the purchase and sale agreement itself. If the contract says "$800,000 for improvements, $200,000 for land," and the parties are arm's-length, the IRS generally respects the split. This is uncommon in residential STR transactions but is the cleanest way to lock in your depreciable base when the seller is indifferent.

Method 2: County Assessor Allocation Applied to Purchase Price

This is the workhorse method. Every county that levies property taxes must separately assess the value of land and improvements. Those assessments are public records. Pull the tax assessment card, note the assessed land value and total, compute the ratio, and apply that ratio to your actual purchase price.

Example: assessor shows $60,000 land / $340,000 total = 15% land ratio. You paid $750,000. Depreciable base: $750,000 × 85% = $637,500. Use the ratio, not the raw assessed dollars — assessors typically assess below market, and using raw dollars would understate your basis.

Method 3: Qualified Appraisal (Cost Approach)

A licensed appraiser can value the property using the cost approach — estimating current replacement cost of the improvements, then backing into land value as the residual. This method is the most defensible in an audit but also the most expensive (typically $1,500–$4,000 for a residential STR). Reserved for high-value properties or situations where the assessor's ratio is meaningfully out of line with comparable land sales.

These three methods are what a CPA will recognize. Rules of thumb and 30/70 splits are not defensible in an audit. Pick a method, document it, and apply it consistently.

Can You Use Your County Assessor's Land Value?

Yes — and this is the most common question CPAs get on this topic. The Tax Court has repeatedly accepted county assessor allocations for federal depreciation purposes when the allocation is reasonable and applied consistently. In Meiers v. Commissioner (T.C. Memo 1982-51), the court accepted the assessor's ratio as the basis for allocating purchase price between depreciable improvements and non-depreciable land.

The IRS Cost Segregation Audit Techniques Guide discusses the assessor-ratio method as one acceptable approach, alongside appraisal and contract allocation. The classification framework from Rev. Proc. 87-56 (class lives for depreciable property) presupposes that a taxpayer has already determined what portion is depreciable via one of the methods above.

Two guardrails apply:

• Reasonable. If the assessor shows 3% land on a Malibu beachfront property, that is not reasonable — sanity-check the ratio against what the parcel would obviously be worth unimproved.
• Consistent. You cannot use the assessor's ratio in Year 1 and then switch to an appraisal in Year 5 because the assessment moved against you. Once you allocate at placed-in-service, that basis is fixed. Changing it later requires an amended return or Form 3115.

Why Land Value Reduces Your Bonus Depreciation Directly

The mechanics are simple and unforgiving: every dollar allocated to land is a dollar you cannot depreciate — under §168(k) bonus depreciation, the standard 27.5-year residential schedule, or the 5- and 15-year accelerated schedules a cost segregation study identifies. Land sits on your balance sheet at cost until you sell.

The swing between a high and a low land allocation on the same purchase price is huge. Consider a $1,000,000 property under the One Big Beautiful Bill Act's 100% bonus depreciation regime (property placed in service after January 19, 2025):

The $250,000 difference in depreciable basis translates to $55,000 more in bonus-eligible deductions and, at a 37% marginal rate, more than $20,000 in additional Year 1 tax savings. Same purchase price. The only variable is how much of that price was land versus improvements. A 30% assumption applied to either property would be wrong in both directions.

If you want to check the depreciable base before you make an offer, this is the number to check — not the purchase price, not the assessed value.

The Range Nobody Tells You About

Land-to-improvement ratios across the US short-term rental map are far wider than most investors realize. There is no "typical" number. There are only qualitative patterns tied to how land supply, location, and construction type interact.

• Urban condos often skew very low. Many assessors record near-zero land value for individual condo units because the land is held by the HOA. Even after a pro-rata share of common area, urban condos frequently show single-digit or low-teen land ratios.
• Rural and mountain properties often skew low. Abundant land supply combined with large cabin structures on multi-acre lots pushes the depreciable share up — commonly low-to-mid teens through low twenties.
• Suburban single-family STRs tend to fall in a middle band. Land supply is adequate but not abundant. This is the population where the "30% rule" happens to be closer to right than wrong — but "closer to right than wrong" is not a defense in an audit.
• Beach, waterfront, and constrained-supply resort markets can skew high. Ratios above 50% are routine; some high-end waterfront submarkets exceed 60%.
• Urban infill in high-cost metros also runs high. Small lots where the dirt itself is scarce push ratios up regardless of what's built on them.

Five different STR investors, all buying at the same price point, can legitimately end up with five very different depreciable bases. All five can be right. None of them will match 30%. If you want to see what a formal study actually costs, we've broken that down separately — but a formal study cannot change the land-versus-improvement math. It only sub-divides the improvement side into 5-, 15-, and 39-year buckets.

What This Means for Your Airbnb Purchase Decision

Two practical implications, both pre-contract.

First: if the Year 1 bonus depreciation deduction is part of your return model, do not use 30% (or any single number) in your underwriting spreadsheet. Pull the actual assessor allocation, apply the ratio to your expected purchase price, and compute the depreciable base honestly. If that number is materially lower than you assumed, recalibrate your offer or walk away. Cost segregation studies performed after closing cannot recover a basis that was never there.

Second: use the land ratio as a screening variable when comparing candidates. Two otherwise-similar STRs in the same market can have meaningfully different depreciable bases based on parcel size and how the assessor has historically allocated. This requires pulling the assessor record on each candidate — a five-minute task most investors skip.

If you're evaluating a specific address, you can run the address on your property and get an estimated land ratio, depreciable base, and Year 1 bonus deduction — closely calibrated to a formal cost segregation study. Takes a few minutes and costs $99. The alternative is discovering the actual number after closing.

Frequently Asked Questions