$475k Cabin vs $1.9M Mountain House: Year-1 Write-Off Math

Most bonus depreciation content assumes bigger is better. The intuition is understandable: a $1.9M home has more square footage, more finishes, and more amenities than a $475k cabin, so surely it generates a bigger tax deduction.

In absolute dollars, yes — usually. But the metric that actually matters for a bonus depreciation rental under 1 million is not the absolute Year-1 deduction. It is the deduction as a percentage of purchase price, which determines your effective discount at closing and your cash-on-cash after tax. And on that metric, small short-term rental cabins in low-land-ratio markets routinely outperform luxury properties by a factor of 2 to 3.

Here is the side-by-side math, followed by the four reasons the ratio comes out this way.

The math is easier to see side by side than to argue about in prose.

Below is a line-by-line comparison of two properties drawn from real deal patterns. The cabin represents the median deal a sub-$1M short-term rental buyer encounters in an inland mountain market like the Smokies, Blue Ridge, Poconos, or Ozarks. The luxury home represents a typical $1.9M ridgeline or golf-community property in the same broad geography.

The cabin generates $140,000 of Year-1 bonus-eligible property against $475,000 of purchase. The luxury home generates $220,000 against $1,900,000. In absolute terms the luxury home wins by $80,000; in ratio terms the cabin wins by 17.9 percentage points, or roughly 2.5x.

At a 37% federal bracket, that translates into an effective closing-cost discount of about 10.9% on the cabin (roughly $51,800 in Year-1 federal tax savings on a $475,000 purchase) versus about 4.3% on the luxury home (roughly $81,400 on a $1,900,000 purchase). Same tax bracket, same strategy, dramatically different capital efficiency per dollar invested.

Cabins have lower land ratios than mountain estates for geographic and zoning reasons.

Land value is not depreciable. Every dollar of purchase price allocated to land is a dollar that cannot generate any bonus depreciation deduction, ever. So the starting point for any cost segregation analysis is the land ratio, and it varies enormously by property type.

Small mountain cabins in inland STR markets typically sit on smaller, less scenic parcels — often interior lots, wooded lots without views, or lots on secondary roads. County assessor data across the Smokies, Blue Ridge, Poconos, and Ozarks commonly shows land ratios of 9–15% of purchase price on properties in the $350k–$650k range. There is simply not much lot-value premium to allocate.

Luxury properties are the opposite. A $1.9M mountain home is usually priced at that level because it sits on a scarce lot — ridgeline, view, water, or a golf-course frontage parcel. That scarcity is priced into the land, not the improvements. Assessor land ratios of 25–40% of purchase price are typical, and view-lot or waterfront luxury can push higher. The zoning code drives it too: many luxury STR communities require minimum 1-acre or 2-acre lots, which mechanically inflates the land allocation.

The delta compounds. On the $475k cabin, 89% of purchase is depreciable. On the $1.9M home, only 68% is. Before we even look at the finish mix, the luxury property has already lost 21 percentage points of denominator.

Luxury finishes are almost all 39-year structural property under IRS classification rules.

This is the second lever, and it is the one most investors miss. The intuition is that expensive finishes must generate bigger bonus deductions because the dollar amounts are bigger. That is exactly backwards.

The IRS classifies property by how it is attached, not by how much it costs. Property that is grouted, embedded, structural, or permanently integrated into the building shell is 39-year real property and is not bonus-eligible. Property that is removable, plug-in, movable, or attached only by fasteners is 5-year personal property and qualifies for 100% bonus depreciation in Year 1 under IRS §168(k).

Luxury finishes systematically fall into the 39-year category:

• Marble slab flooring and stone walls — grouted, embedded, structural. 39-year.
• Custom millwork built into wall framing — cabinetry that is part of the structure, not removable. 39-year.
• Architectural glass walls and integrated glazing systems — permanent, structural. 39-year.
• Integrated whole-home audio wiring and in-wall speaker systems — the speakers are 5-year, but the embedded low-voltage wiring is 39-year.
• Embedded lighting coves, backlit onyx panels, custom cove ceilings — structural finish. 39-year.
• High-end HVAC ducted systems with in-ceiling registers — the ductwork and rough-in is 39-year.

Cabin finishes are the mirror image. LVP flooring is removable and classifies as 5-year. Prefab or IKEA-style cabinetry is not structural and classifies as 5-year. Standalone appliances — even nice ones — are 5-year. Plug-in lighting and portable speakers are 5-year. When you replace a $60,000 marble slab with $6,000 of LVP, the dollar amount drops but the depreciation category upgrades from 39-year to 5-year, which under bonus depreciation is a 34-year time-value swing.

The counterintuitive result: an ordinary-finish cabin often has a higher percentage of finish dollars in the 5-year bucket than an ultra-luxury property does. See our companion piece on cost segregation vs. bonus depreciation for the mechanical detail on how classification actually flows through a study.

Land improvements matter more on smaller properties because outdoor dollars are roughly constant.

15-year land improvements — decks, hot tubs, fire pits, driveways, landscaping, retaining walls, fencing — are 100% bonus-eligible in Year 1 under IRS §168(k). They are a critical STR differentiator and every short-term rental buyer should look for them explicitly.

The interesting math is that these outdoor amenities cost roughly the same in absolute dollars regardless of purchase price. A hot tub is $8,000–$15,000 whether it sits behind a $475k cabin or a $1.9M home. A fire pit installation is $3,000–$8,000. A gravel driveway with a small paved apron is $10,000–$25,000. A wraparound deck with railings is $20,000–$40,000. Basic landscaping and irrigation is $10,000–$20,000.

Add them up on a typical cabin and 15-year land improvements land around $45,000, or roughly 10.6% of improvements value. On the luxury home, the equivalent line items — even upgraded to formal landscaping with paved paths, a larger deck, and a bigger driveway — commonly land around $65,000, or only 5% of improvements value. The dollar amount is bigger on the luxury home, but as a percentage of the depreciable basis it is half.

This is why fully-amenitized sub-$1M cabins with pools, hot tubs, and fire pits often outperform on the 15-year line by 5+ percentage points of purchase price. The outdoor budget is a bigger slice of a smaller pie.

The FF&E asymmetry favors small STRs by the same logic.

Fully turnkey short-term rentals convey with furniture, fixtures, and equipment. When FF&E conveys as part of the purchase, the buyer inherits the depreciable basis in that property, which is classified as 5-year personal property and is 100% bonus-eligible in Year 1.

Conveyed FF&E on a well-equipped short-term rental is typically $60,000–$90,000 in absolute value: beds, sofas, dining sets, patio furniture, kitchenware, linens, TVs, decor. That number is largely a function of property size and guest capacity, not purchase price. A 3-bedroom cabin sleeps 6–8 and needs roughly the same FF&E investment whether it is priced at $475k or $700k.

On a $475,000 purchase, $75,000 of FF&E is 15.8% of purchase price — a substantial line item all by itself. On a $1,900,000 purchase, the same $75,000 of FF&E is only 3.9% of purchase price. Same absolute dollars, radically different ratio impact.

Two practical implications. First, always confirm FF&E conveyance in the purchase agreement with an itemized bill of sale — this documents the depreciable basis. Second, when comparing two similarly-priced STRs, the fully turnkey one has a meaningful depreciation advantage over the empty one, even if the empty one has a lower sticker price.

Screening on ratio, not absolute dollars, changes how you shop.

The traditional cost segregation workflow happens after closing. An investor buys a property, then commissions a formal engineering-based cost segregation study (typically $5,000–$12,000, filing-grade) and accepts whatever the deduction comes out to. This is fine if you already know the property is the right one. It is not helpful if you are still choosing between offers.

Pre-offer screening replaces the after-the-fact workflow with a decision framework. The core question is not "what deduction will this specific property generate" but "of the properties I could buy, which one generates the best deduction per dollar of capital deployed." That is a ratio question, and it changes the shopping list.

Concretely, pre-offer screening means:

1. Filter by land ratio first. Pull county assessor data for every candidate property. Anything above 25% land ratio needs a strong justification to make the shortlist.
2. Look at the finish mix from photos. Marble, custom millwork, and architectural glass are signals of 39-year weighting. LVP, prefab cabinetry, and standalone appliances are signals of 5-year weighting. Neither is inherently better as a property — but they produce very different tax outcomes.
3. Verify outdoor amenities. Hot tubs, fire pits, decks, pools, and paved driveways are 15-year property. Count them.
4. Confirm FF&E conveyance in writing. Ask the listing agent for the FF&E inclusion list before you offer. If it is not conveyed, model it as a Year-0 CapEx (still 5-year, still bonus-eligible, but not part of purchase basis).

The DepreciMax platform is built on this workflow. Market search scores every active listing on the four factors above and produces a prospecting-grade bonus depreciation estimate — closely calibrated to what a formal study will conclude, but delivered pre-offer. When you narrow down to the property you actually want to buy, the $99 property report ingests 7–9 listing photos and returns a line-item Year-1 estimate. A formal engineering-based cost segregation study is still the filing-grade deliverable at or after closing; the $99 report bridges the two.

For a deeper walkthrough of the mechanics behind the STR bonus depreciation opportunity, see our complete guide to the STR loophole — how §168(k) interacts with IRC §469, who qualifies, and what kills the deduction. For a broader sizing comparison across the $500k–$1M band, see $500k vs $1M STR bonus depreciation Year 1 (2026). And for a curated market list, see best STR markets under $500k in 2026.

Frequently asked questions

Does cost segregation make sense on a small short-term rental under $1 million?

Yes — and often more sense than on a luxury property. Cost segregation on a sub-$1M short-term rental frequently produces a higher bonus-eligible percentage of purchase price than a $2M+ luxury home. On a $475,000 cabin in a low-land-ratio market, roughly 29.5% of purchase price is commonly bonus-eligible under IRS §168(k) — about $140,000 in Year-1 deductions. The absolute dollar figure is smaller than a luxury property, but the deduction per dollar invested is materially higher.

Why does a $475k cabin often have a higher bonus-eligible % than a $1.9M luxury home?

Two levers drive it. First, mountain-cabin markets typically have land ratios of 10–15% of purchase price, while $2M+ luxury properties often sit on land that is 25–35% of purchase price — land is not depreciable. Second, luxury finishes like marble slabs, custom millwork, integrated architectural glass, and embedded audio systems are classified as 39-year structural property under IRS rules, not 5-year personal property. Prefab cabinetry, off-the-shelf appliances, and standard flooring on a smaller cabin classify as 5-year and qualify for 100% bonus depreciation in Year 1.

What is the typical land ratio on a sub-$1M mountain cabin?

Sub-$1M mountain cabins in inland STR markets — the Smokies, Blue Ridge, Poconos, Ozarks, Broken Bow, Lake Cumberland — commonly show county assessor land ratios of 9–15% of purchase price. This is materially lower than coastal or view-lot luxury properties, where waterfront or ridgeline scarcity pushes land ratios to 25–40% or higher. Every additional percentage point of land ratio directly caps the maximum possible bonus depreciation deduction.

Why are luxury finishes classified as 39-year property instead of 5-year?

Under IRS classification rules, property that is grouted, embedded, structural, or permanently integrated into the building shell is 39-year real property. Marble slab flooring, custom millwork built into wall framing, architectural glass walls, integrated whole-home audio wiring, and embedded lighting coves all meet this test — they are not removable without structural work. Prefab or off-the-shelf equivalents — LVP flooring, IKEA-style cabinetry, standalone appliances, plug-in lighting — remain 5-year personal property because they can be replaced without altering the structure. Luxury properties skew heavily toward the embedded 39-year category.

How much of a small STR purchase is typically 15-year land improvements?

On a $475,000 short-term rental cabin with typical outdoor amenities — decking, hot tub, fire pit, gravel or paved driveway, basic landscaping — 15-year land improvements commonly represent 9–12% of improvements value, or roughly $40,000–$50,000 in absolute terms. These outdoor features qualify for 100% bonus depreciation in Year 1 under IRS §168(k). On larger properties, the same categories exist but represent a smaller percentage of the total purchase because the structural portion (39-year) grows faster than outdoor improvements as square footage and finish level increase.

Do conveyed furnishings (FF&E) count toward bonus depreciation on a small STR?

Yes. When furniture, fixtures, and equipment convey with a fully turnkey short-term rental sale, the buyer inherits the depreciable basis in that FF&E. On a sub-$1M cabin, conveyed FF&E is typically valued at $60,000–$90,000 and is treated as 5-year personal property — 100% bonus-eligible in Year 1. Because that dollar amount is roughly constant across price points, FF&E represents a larger percentage of purchase on a $475,000 property than on a $1,900,000 one. Confirm FF&E value and inclusion in the purchase agreement — an itemized bill of sale strengthens the depreciable basis.

Is a formal engineering-based cost segregation study still worth it on a small STR?

It depends on the deduction size and your tax bracket. Formal engineering-based cost segregation studies typically cost $5,000–$12,000 and are filing-grade — the deliverable your CPA files with the return. On a $475,000 cabin generating roughly $140,000 in Year-1 bonus-eligible property at a 37% federal bracket, the study pays for itself many times over. Prospecting-grade estimates like the DepreciMax $99 report closely calibrated to formal studies let investors screen properties before offer; a formal study still happens at or after closing on the property they actually buy.

What are the biggest mistakes investors make screening small STRs for bonus depreciation?

The most common mistakes: (1) using absolute dollar deduction instead of percentage of purchase price to compare properties — a $1.9M home with $220,000 in bonus-eligible property is worse per dollar than a $475,000 cabin with $140,000, (2) assuming luxury finishes automatically mean more bonus depreciation — marble and custom millwork are 39-year, not 5-year, (3) ignoring county assessor land ratios and buying view lots where 30–40% of purchase price is non-depreciable land, and (4) not confirming FF&E conveyance in writing, which can leave $60,000–$90,000 of 5-year property on the table.

This article is for educational purposes only and does not constitute tax or legal advice. Tax laws change frequently and individual circumstances vary. Consult a qualified CPA or tax attorney before implementing any tax strategy. Illustrative allocations are prospecting-grade; a formal engineering-based cost segregation study is filing-grade.