A typical $500K STR delivers ~$31,000 in federal Year-1 bonus depreciation cash savings (32% bracket). A typical $1M STR delivers ~$74,000 (35% bracket). The $1M property wins on absolute dollars and on cash-on-cash (30.8% vs. 25%) because the higher-bracket buyer benefits more per dollar of deduction. Both numbers assume 15% land ratio and 24% bonus-eligible — verify in the DepreciMax calculator for any specific zip code.
"How much can I save?" is the first question every STR investor asks — and the answer is heavily dependent on purchase price. The §168(k) deduction scales with the depreciable basis, but it doesn't scale linearly because land ratios drift, bonus-eligible percentages shift by property type, and the federal bracket interaction is non-linear at the upper end.
This article compares Year-1 §168(k) bonus depreciation cash savings at four typical STR purchase price tiers: $400K, $500K, $750K, and $1M. Every number comes from the DepreciMax calculator at market-typical inputs — you can verify any of them in your browser and adjust for your specific deal. For a market-level view of where these numbers run highest, our 2026 STR Bonus Depreciation Market Study ranks 197 US STR markets by median bonus-eligible share of purchase price.
Side-by-side: bonus depreciation by purchase price tier
| Tier | $400K STR | $500K STR | $750K STR | $1M STR |
|---|---|---|---|---|
| Land ratio (typical) | 18% | 15% | 15% | 12% |
| Depreciable basis | $328,000 | $425,000 | $637,500 | $880,000 |
| Bonus-eligible % (mid-amenity) | 22% | 23% | 24% | 25% |
| Year-1 §168(k) deduction | $72,160 | $97,750 | $153,000 | $220,000 |
| Federal marginal bracket | 24% | 32% | 32% | 35% |
| Year-1 federal cash savings | $17,318 | $31,280 | $48,960 | $77,000 |
| Down payment (25%) | $100,000 | $125,000 | $187,500 | $250,000 |
| Year-1 tax cash-on-cash | 17.3% | 25.0% | 26.1% | 30.8% |
Three patterns jump off this table.
First, the absolute Year-1 cash savings scale much faster than the price. Going from $500K to $1M is a 100% price increase but a 146% increase in Year-1 cash savings. That's the combined effect of lower land ratios at higher price points (better depreciable basis per dollar of price), slightly higher bonus-eligible % at higher tiers (better amenity packages), and bracket creep (the higher-bracket buyer captures more cash per dollar of deduction).
Second, the cash-on-cash from tax alone is in the 17–31% range across all tiers. Even the smallest STR delivers cash-on-cash from the tax benefit that beats most equity index returns — and that's before you collect a single night of rental income.
Third, the $400K tier underperforms not because the math is bad, but because the typical $400K buyer sits in a lower marginal bracket. The deduction-per-dollar-of-price ratio is fine; the bracket-per-dollar-of-deduction is what drags the cash savings. This is why $400K STR deals get sized differently than $1M deals: at the bottom of the market the deal has to work on cash flow too; at the top, the tax savings alone usually carry it.
$500K STR breakdown
A typical $500,000 mid-amenity STR — three bedrooms, a hot tub, a finished patio, no pool — looks like this in the calculator:
$500K STR · $425K depreciable basis · 23% bonus-eligible → $97,750 Year-1 deduction → $31,280 federal cash savings at 32% bracket. At 25% down ($125K), the tax benefit alone delivers 25.0% Year-1 cash-on-cash. Add typical rental yield (5–7% on a stabilized STR) and Year-1 IRR clears 30% in most resort markets.
What changes the answer for a $500K property:
- Beach property: land ratio climbs to 25–30%, depreciable basis drops to $350K–$375K, deduction falls to ~$80K, cash savings drop to ~$25K.
- Mountain/desert cabin with hot tub + outdoor kitchen: bonus % rises to 28%, deduction climbs to ~$119K, cash savings to ~$38K.
- Urban condo: land ratio drops to 5%, basis rises to $475K, but bonus % drops to 17% (no outdoor amenities), deduction lands at ~$81K.
- Top bracket (37%) instead of 32%: cash savings jump from $31K to $36K — a 16% lift for the same property.
$1M STR breakdown
A typical $1,000,000 luxury STR — four bedrooms, hot tub, pool, full FF&E, smart-home wiring — comes out roughly:
$1M STR · $880K depreciable basis · 25% bonus-eligible → $220,000 Year-1 deduction → $77,000 federal cash savings at 35% bracket. At 25% down ($250K), the tax benefit alone delivers 30.8% Year-1 cash-on-cash. At a 37% bracket, the same property delivers $81,400 cash and 32.6% cash-on-cash.
The $1M tier is where bonus depreciation starts to be the dominant driver of the buy decision. At $77K of federal Year-1 cash, the tax savings exceed a full year of P&I debt service on most financing structures — meaning the property is effectively "free for a year" from a cash-out-of-pocket perspective. That's the math behind the very common $1M-and-up STR investor profile: high-W-2 earner, 35–37% bracket, willing to take on a non-cash-flow-positive deal because the Year-1 tax shield carries it.
What changes the comparison
Amenity package — biggest swing factor
Two $750K STRs on the same market street can deliver $40K vs. $58K in Year-1 cash savings based purely on amenity package. The differentiators that move bonus-eligible % most:
- Pool or hot tub (+3–6 points)
- Outdoor kitchen or fire pit (+2–4 points)
- Fully furnished FF&E that conveys with the sale (+4–8 points)
- Smart-home / Lutron / Sonos wiring (+1–3 points)
- Heated driveway, snowmelt, exterior lighting (+1–2 points)
This is why pre-offer property analysis matters. The two finalists in your buyer's tour can differ by $20K+ in Year-1 cash savings, and no MLS listing tells you that. DepreciMax for Brokers generates side-by-side comparisons for exactly this case.
Bracket interaction at large deductions
A $220,000 Year-1 deduction is large enough to cross bracket boundaries for most buyers. If your AGI before the deduction is $450K (top of the 32% bracket), the first $55K of deduction comes off at 35%, the next $145K at 32%, the next $20K at 24%. The effective rate on the full deduction lands around 31.6% — not the headline 35% bracket. For deductions this large, run the marginal rate per dollar instead of multiplying by a single bracket.
State conformity
The numbers above are federal cash savings. In states that conform to §168(k) (40+ states), add another 3–9% in state tax savings on the same deduction. In the six non-conforming states (CA, NY, NJ, PA, IL, MA), state benefit is deferred over the asset's life rather than concentrated in Year 1 — the federal numbers are unchanged but the state cash benefit is spread out. Our state conformity map covers all 50 states.
Run your specific property in the calculator.
Plug in your zip code and price. Land ratio and bonus-eligible % auto-fill from market data. See the Year-1 cash savings and 5-year hold projection in your browser — no signup, no email gate.
Run the Free Calculator →Above $1M: the diminishing returns question
Year-1 cash savings continue scaling past $1M, but at a slowing rate. A $1.5M STR at 12% land, 26% bonus, 37% bracket delivers ~$127K in Year-1 cash savings — but the deduction is now $343K, larger than most buyers' AGI. Excess deductions are either suspended (passive activity rules) or carried forward as a net operating loss (NOL) — usable but not immediately monetizable. Above ~$1.5M, the right framing shifts from "Year-1 cash savings" to "multi-year NOL planning with cost seg."
For ultra-high-bracket investors with $2M+ deals, the analysis is also no longer "should I take bonus dep" but "should I do an engineered cost seg now or a §481(a) catch-up later." See our cost segregation vs. bonus depreciation explainer for that decision.
Recapture: same math at the back end
Every dollar of bonus depreciation deferred today is recaptured at exit. On a $1M property with $220K of Year-1 bonus dep, the §1245 recapture liability at sale (assuming 5-year hold, no 1031) is $220K × 37% = $81,400 — close to a wash with the Year-1 federal savings. But the time value of money, bracket arbitrage between Year-1 and exit-year, and 1031 / stepped-up-basis defer strategies mean the net is almost always positive for the investor. Full math in our recapture explainer.
For CPAs and tax advisors
If you're advising STR investor clients on Year-1 deduction sizing, the DepreciMax for Tax Professionals workflow gives you co-branded outputs, line-item §168(k) classifications, and CPA-ready methodology notes. Skip the spreadsheet and hand your client a $99 estimate closely calibrated to formal cost seg's bonus-eligible % — sized in 3 minutes during the buyer conversation, not three weeks after closing.
Frequently asked questions
How much bonus depreciation can I get on a $500K STR?
On a typical $500,000 STR with a 15% land ratio and 23% bonus-eligible percentage, the Year-1 §168(k) deduction is roughly $97,750 ($425,000 basis × 23%). At a 32% federal marginal bracket, that's about $31,280 in federal cash tax savings in Year 1. A higher-amenity property (hot tub + outdoor kitchen) at 27% bonus can lift cash savings to ~$36,800.
How much bonus depreciation can I get on a $1M STR?
On a typical $1,000,000 STR with a 12% land ratio and 25% bonus-eligible percentage, the Year-1 deduction is roughly $220,000. At a 35% federal bracket, federal cash savings are about $77,000. Luxury STRs with pools and full FF&E packages can push bonus-eligible to 30%+, delivering Year-1 deductions of $260K+ and cash savings of $90K+.
Is a more expensive STR always a better tax play?
Not always — the better metric is Year-1 cash savings per dollar of down payment, not absolute deduction. A $1M property at 25% down with $77K Year-1 federal savings delivers 30.8% cash-on-cash from the tax benefit alone. A $500K property at 25% down with $31K savings delivers 25%. The $1M wins on both axes because higher-bracket buyers usually target larger properties — but the spread depends on bracket, land ratio, and amenity package.
Does the bonus depreciation percentage change with property price?
The bonus-eligible percentage is a function of property type and amenity package, not the price tag. A $400K rural cabin with a hot tub can have the same 25% bonus-eligible ratio as a $1.2M luxury cabin with a pool. Where price matters is on absolute dollar deduction and on bracket interaction — larger deductions can cross bracket boundaries and shift the effective tax rate.
What is the breakeven property price for bonus depreciation to be worth it?
There's no hard breakeven — §168(k) is essentially free to elect. The question is when Year-1 cash savings exceeds the cost seg study cost. A $99 DepreciMax report is the floor; a formal study is $5K–$8K. At 24% bracket, $4,200 in tax savings (the breakeven for a $5K formal study) requires ~$17.5K Year-1 deduction — achievable on STRs as small as $80K–$100K. Below $200K, use the $99 report; above $400K, formal study starts to make sense; above $750K it almost always does.
How does down payment size affect Year-1 cash-on-cash from bonus depreciation?
Cash-on-cash from bonus dep = Year-1 federal cash savings ÷ down payment. Standard STR financing is 20–25% down. A $750K property at 25% down ($187.5K) and $48,960 in Year-1 savings delivers 26.1% cash-on-cash from tax alone. A 20% down option ($150K) lifts that to 32.6%. Section 121 carve-outs (live in 2 years, convert to STR) can push tax-only cash-on-cash above 100% — provided the property genuinely qualifies as STR after conversion.
This article is for educational purposes only and does not constitute tax advice. Consult a qualified CPA before relying on any of these numbers in your specific situation.