The One Big Beautiful Bill Act (OBBBA, P.L. 119-21) restored 100% bonus depreciation permanently for property acquired AND placed in service after January 19, 2025. If your STR contract was signed on or before January 19, 2025, you fall under the pre-OBBBA phasedown — 40% bonus for 2025 — even if you closed later. The IRS uses the "written binding contract" date under IRC §168(k)(2)(E)(i), not the closing date. Before you file by October 15, pull your signed purchase-and-sale agreement and check the execution date.
Contract signed on/before Jan 19, 2025: 40% bonus depreciation (pre-OBBBA phasedown rate). · Contract signed after Jan 19, 2025: 100% bonus depreciation (OBBBA permanent restoration). · Year-1 federal cash-flow delta on a $150K bonus-eligible base at 37%: $33,300 — a permanent Year-1 loss, not a timing shift.
Why January 19, 2025 matters
Before OBBBA, federal bonus depreciation was on a scheduled phasedown from the Tax Cuts and Jobs Act (TCJA) — 100% for property placed in service through 2022, then dropping 20 percentage points per year: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and 0% starting 2027.
OBBBA reversed that. Section 70301 of the Act permanently restored 100% bonus depreciation. But Congress made the change prospective — it applies only to property "acquired" and "placed in service" AFTER January 19, 2025. Property acquired before that date is stuck at the phasedown rate that was in effect for the acquisition year.
For 2025 STR purchases, that creates a hard split:
- Acquired on or before January 19, 2025: 40% bonus depreciation.
- Acquired after January 19, 2025: 100% bonus depreciation (assuming also placed in service after that date).
What "acquired" means under §168(k)(2)(E)(i)
This is where the rule catches people. "Acquired" for bonus depreciation purposes is not the closing date. Under IRC §168(k)(2)(E)(i), property is treated as acquired on the earlier of the date it is placed in service or the date of the written binding contract to acquire it. And Reg §1.168(k)-2 is explicit: a signed purchase-and-sale agreement counts as a written binding contract from the day it is executed.
Practical translation: if you signed a P&S in December 2024 to buy a $1.4M STR in Sedona, and you closed on April 30, 2025, your acquisition date for §168(k) is December 2024. You are at 40% bonus, not 100% — even though you own the property in 2025 and place it in service in 2025.
If your contract is voidable at either party's option without penalty (a genuinely non-binding letter of intent), it doesn't fix the acquisition date. But contingencies for the taxpayer's benefit (financing, inspection, appraisal) generally do not defeat the "binding" status per Reg §1.168(k)-2(b)(5)(iii)(A). Consult a CPA on your specific contract language.
Two personas, same $1.4M property
Alice tours a Sedona STR in November 2024, signs a purchase-and-sale agreement on November 12, 2024, and closes May 15, 2025 with financing. She furnishes the property and lists it on Airbnb on June 1, 2025 — placed in service in 2025.
Her acquisition date is November 12, 2024. That's on the pre-OBBBA side of the January 19, 2025 cutoff. Alice's bonus depreciation rate is 40% for calendar year 2025. If her bonus-eligible base is $150,000, her Year-1 §168(k) deduction is $60,000. The remaining $90,000 depreciates over regular MACRS class lives — 5-year property recovers over ~6 years, 15-year property over 15 years.
At a 37% federal marginal rate, Alice's Year-1 federal tax savings are $22,200. Not zero — but $33,300 less than if she had held off signing until after January 19.
Bob tours the exact same Sedona property in January 2025 but doesn't sign until February 3, 2025 — after the January 19, 2025 OBBBA cutoff. He closes April 10, 2025 and lists on Airbnb May 1, 2025.
His acquisition date is February 3, 2025. Both his acquisition and placed-in-service dates are after the cutoff. Bob is at 100% bonus. His Year-1 §168(k) deduction on the same $150,000 bonus-eligible base is $150,000.
At the same 37% federal marginal rate, Bob's Year-1 federal tax savings are $55,500 — $33,300 more than Alice on the identical property, purely because of the contract date.
The dollars at stake
The 40% vs 100% split translates directly to Year-1 tax savings. Assuming a 37% federal marginal rate and a $150,000 bonus-eligible base, here is the delta by property price bucket:
| Purchase price | Typical bonus base* | 40% Y1 deduction | 100% Y1 deduction | Federal tax delta @ 37% |
|---|---|---|---|---|
| $500,000 | $80,000 | $32,000 | $80,000 | $17,760 |
| $750,000 | $130,000 | $52,000 | $130,000 | $28,860 |
| $1,000,000 | $180,000 | $72,000 | $180,000 | $39,960 |
| $1,500,000 | $280,000 | $112,000 | $280,000 | $62,160 |
| $2,000,000 | $380,000 | $152,000 | $380,000 | $84,360 |
*Illustrative bonus-eligible base at typical STR ratios (17-19% of purchase price for well-furnished STRs). Actual bonus-eligible base depends on finishes, amenities, land-value ratio, and property age. Run a DepreciMax property report for a calibrated per-property number.
The 40% number is a permanent Year-1 loss, not a timing shift. The other 60% depreciates over the property's regular MACRS class life — years, not months. If you're on the wrong side of the cutoff, you cannot recover the missed 60% acceleration through any late election. Documentation from the contract signing matters.
Screening a property before you sign the P&S?
A DepreciMax Property Report tells you the Year-1 bonus-eligible dollar amount from listing photos — before you commit to a purchase price. If you're still shopping in Q4 2025, both dates are on the OBBBA side. $99 per property, no subscription.
Run a Property Report — $99 →Still shopping in Q4 2025?
Good news. Any STR contract signed after January 19, 2025 and placed in service by December 31, 2025 qualifies for 100% bonus depreciation. Both dates are on the OBBBA side.
If you're targeting a Q4 2025 close, the priorities are:
- Move quickly on placed-in-service. Furnished, listed, and available to rent by December 31. Our placed-in-service deadline calendar lays out working-back timing for cash, conventional, and jumbo closes.
- Screen properties by bonus-eligible potential before you offer. A DepreciMax report shows the Year-1 bonus-eligible dollar amount from listing photos — before you commit to a purchase price.
- Confirm your state doesn't hollow out the benefit. If you're buying an STR in a decoupled state (CA, PA, NJ, MA — see our state add-back forms walkthrough), the federal number is unaffected but the state savings are muted.
Documentation to keep
On audit, the IRS will look at these four documents to confirm your acquisition and placed-in-service dates:
- The signed purchase-and-sale agreement with its execution date. This is the primary evidence of your acquisition date.
- Any addenda or contract amendments. A material amendment can theoretically re-open the acquisition date question in narrow cases.
- The closing statement (HUD-1 or ALTA settlement statement) with the closing date and property description.
- Evidence of placed-in-service. The first booking notification, first listing screenshot, or first advertisement — whichever came first. IRS Reg §1.167(a)-11(e)(1)(i) treats property as placed in service when it is "first placed in a condition or state of readiness and availability for a specifically assigned function."
What if you filed with the wrong rate
If you filed your 2025 return claiming 100% bonus but your acquisition date puts you at 40%, that is a math error that will likely trigger IRS correspondence. Amend proactively (Form 1040-X) rather than wait for a notice.
If you filed claiming 40% but your acquisition date entitles you to 100%, you're leaving money on the table. Amend for the higher deduction. In both cases, retain the contract documentation and consult your CPA before filing the amendment.
Federal number is only half the picture. If your STR is in California, Pennsylvania, New Jersey, or one of the other decoupled states, the state return needs its own add-back computation. See the state-by-state form walkthrough →
Frequently asked questions
What is the January 19, 2025 cutoff for bonus depreciation?
The One Big Beautiful Bill Act (OBBBA, P.L. 119-21) restored 100% bonus depreciation permanently for property acquired and placed in service after January 19, 2025. Property acquired on or before January 19, 2025 falls under the pre-OBBBA phasedown schedule: 40% bonus depreciation for property placed in service during calendar year 2025.
What counts as "acquired" for bonus depreciation purposes?
Under IRC §168(k)(2)(E)(i) and Reg §1.168(k)-2, property is treated as "acquired" on the date the taxpayer enters into a written binding contract to acquire it, not the closing date. A signed purchase-and-sale agreement is typically a written binding contract. If you signed a P&S on November 12, 2024 and closed May 15, 2025, your acquisition date is November 12, 2024 — you're at 40%, not 100%.
What if my contract was signed before January 19, 2025 but had contingencies?
A contract with common financing, inspection, or appraisal contingencies is generally still considered a "written binding contract" under Reg §1.168(k)-2(b)(5)(iii)(A) if the contingencies are for the taxpayer's benefit and can be waived by the taxpayer. If the contract is genuinely non-binding (e.g., a letter of intent, or contract voidable at either party's option without penalty), it may not fix the acquisition date. This is a fact-specific question — consult your CPA with the actual contract language.
I'm still shopping for an STR in Q4 2025 — do I get 100% bonus?
Yes, if both conditions are met. If you sign the purchase contract AFTER January 19, 2025 and place the property in service by December 31, 2025, you qualify for 100% bonus depreciation. Both dates are on your side of the OBBBA cutoff.
How much money is at stake between 40% and 100%?
On a $150,000 bonus-eligible base: at 100%, you deduct $150,000 in Year 1; at 40%, you deduct $60,000 in Year 1 and the remaining $90,000 depreciates over the normal MACRS life. At a 37% federal marginal rate, that's a $33,300 Year-1 federal cash-flow difference. Plus state savings on top in conforming states.
Do I need to prove my acquisition date to the IRS?
Yes. Retain the signed purchase-and-sale agreement with its execution date, any addenda, the closing statement (HUD-1 / ALTA settlement statement), and evidence of when the property was placed in service (first booking, first listing date, or first advertisement). On audit, the IRS will look at all four to confirm the acquisition and placed-in-service dates.
Screen a property before you sign the P&S
A DepreciMax Property Report tells you the Year-1 bonus-eligible dollar amount from listing photos — before you commit to a contract. $99 per property, no subscription.
Run a Property Report — $99 →Federal statute: IRC §168(k)(2)(E)(i) — Special rule for property with longer production periods; acquisition date rule.
Federal regulation: Treas. Reg. §1.168(k)-2 — Additional first year depreciation deduction; written binding contract definition at §1.168(k)-2(b)(5)(iii).
Placed-in-service definition: Treas. Reg. §1.167(a)-11(e)(1)(i).
OBBBA: One Big Beautiful Bill Act, P.L. 119-21, §70301 — permanent restoration of 100% bonus depreciation; effective for property acquired and placed in service after January 19, 2025.
Related guides: Placed-in-Service Deadline Calendar 2026 · State Add-Back Forms Walkthrough · Is 100% Bonus Depreciation Permanent Under OBBBA?
Verified by the DepreciMax Research Team, 2026-09-26. Not tax advice — consult a licensed CPA for filing-specific guidance.