Year-1 bonus depreciation on an STR is (Purchase Price × (1 − Land Ratio)) × Bonus-Eligible %. Multiply that deduction by your federal marginal bracket to get the cash tax savings. Example: a $750,000 STR at 15% land ratio and 24% bonus eligible = $153,000 deduction. At a 32% bracket that's $48,960 in federal cash savings in Year 1. Use the DepreciMax calculator — land ratio and bonus % auto-fill by zip code or city.
Every STR investor eventually asks the same question: how much will §168(k) bonus depreciation actually save me on this property? The answer drives whether you stretch on the offer, walk, or restructure. And the math, contrary to how it gets discussed in real-estate forums, is not complicated.
This article breaks the estimate into the four inputs that matter, gives reasonable defaults for each, and walks two worked examples. By the end you'll be able to size any STR's Year-1 deduction in under 60 seconds — or skip the math entirely and use our free calculator, which auto-fills the two hardest numbers from market data.
The four inputs
Every Year-1 bonus depreciation estimate boils down to four numbers. Get these right and you have a defensible deduction estimate; get them wrong and your model is off by 30%+.
1. Purchase price
The contract price (or expected offer) of the property. Closing costs that capitalize into basis — title, recording, transfer tax — add ~1–3% but are usually rounded into the price for estimation. Land value is not separated yet; we'll do that next.
2. Land value ratio
Land is non-depreciable. To find the depreciable basis, subtract the land's share of the purchase price. Common ranges:
- Urban condos: 0–8% land ratio (the unit itself owns no land — common-area land is HOA-allocated)
- Suburban single-family STRs: 15–22% land ratio
- Resort/mountain markets: 12–18% (improvements dominate)
- Desert/scenic-view properties: 18–28% (land scarcity)
- Beachfront / waterfront: 25–40% (raw land value rises)
Data sources, in order of reliability: county assessor records (most accurate, often free online), aggregated county-assessor land value data (DepreciMax uses this), FHFA zip-level land share (national fallback), and finally market-typical defaults. Don't use the IRS "20% rule of thumb" for STRs — it's wrong by 5–10 points in most resort markets where land is either much higher (beach) or much lower (mountains, deserts) than the national average.
3. Bonus-eligible percentage
The share of the depreciable basis that qualifies for 100% bonus depreciation under §168(k). Two property classes qualify: 5-year personal property (appliances, FF&E, finishes, decorative lighting, low-voltage wiring) and 15-year land improvements (pools, hot tubs, fire pits, outdoor kitchens, patios, fencing, landscaping). The remaining 39-year structural shell depreciates straight-line and is not bonus-eligible.
Typical bonus-eligible % by property type:
- Urban condo, minimal amenities: 14–18%
- Suburban STR, standard finishes: 18–22%
- Resort cabin with hot tub + outdoor kitchen: 22–28%
- Luxury STR with pool, full FF&E, smart home: 26–34%
- Mountain ski lodge with extensive land improvements: 28–35%
This is the input where free calculators and AI photo analysis diverge. A zip-based default gets you to a market-typical average (±10–15% of formal cost seg). A photo-based estimate that classifies actual finishes and amenities (DepreciMax property report, $99) gets you to closely calibrated to formal cost seg's bonus-eligible %. A formal engineering cost seg study ($5,000–$8,000) is what you actually file with the IRS.
For a market-typical baseline on any US STR market, our 2026 STR Bonus Depreciation Market Study ranks 197 US STR markets by median bonus-eligible share of purchase price — Lake Cumberland, KY leads at 27.1% median.
4. Federal marginal bracket
The deduction itself isn't the cash savings — your bracket is. A $150,000 deduction is worth $36,000 at 24%, $48,000 at 32%, or $55,500 at 37%. For 2026, the federal brackets for married filing jointly are: 22% to $206,700; 24% to $394,600; 32% to $501,050; 35% to $751,600; 37% above. Most STR investors taking bonus dep land in 32–37% federally; state tax adds another 0–13% depending on jurisdiction.
The formula
Combining the four inputs:
Year-1 cash savings = Purchase Price × (1 − Land Ratio) × Bonus-Eligible % × Marginal Bracket
That's it. Memorize this and you can ballpark any STR deduction in your head: $1M property × 85% (no land) × 25% bonus × 35% bracket ≈ $74,400 federal cash in Year 1.
Worked example 1: $750K Joshua Tree desert cabin
At a 6.5% mortgage on 25% down ($562,500 financed), monthly P&I is ~$3,553 — total annual debt service ~$42,640. The Year-1 federal tax savings alone exceed a full year of debt service. That's the math behind why STR investors stretch on Year-1 acquisitions and why "before the offer" is the only time the number matters.
Worked example 2: $1.2M Park City ski-in condo
Note how the low land ratio (condos own almost no land) and high marginal bracket combine to deliver a bigger deduction-to-price ratio than the desert example, even though the bonus-eligible % is lower. This is the math that drives the urban-condo STR thesis.
Skip the math. Use the free calculator.
Plug in a zip code and price. We auto-fill the land ratio and bonus-eligible % from market data, run the §168(k) math, and show the 5-year hold projection — all in your browser, no signup.
Run the Free Calculator →State conformity: don't double-count
Federal §168(k) bonus depreciation flows to your federal 1040. State conformity is separate. Most states (40+) conform fully and you get the same Year-1 deduction on your state return. Six states do not: California, New York, New Jersey, Pennsylvania, Illinois, and Massachusetts. In non-conforming states, the bonus deduction is added back at the state level and depreciated straight-line over the asset's life — so the state cash benefit is deferred over 5–39 years rather than concentrated in Year 1.
The federal benefit is unaffected in all 50 states. If you're modeling cash savings in a non-conforming state, calculate federal × federal bracket only; ignore state in Year 1 and account for it as a 5–39 year straight-line on the state side. Our state conformity map covers all 50 states' treatment in detail.
Common estimation mistakes
Using a flat 20% land ratio
The "20% rule" comes from IRS Publication 946's residential rental property example. It's wrong for most STRs — beach properties run 30%+, desert and mountain markets run 12–18%, urban condos run 0–8%. A 10-point land ratio error on a $750K property changes the deduction by $18,000+.
Treating bonus % as a "market-wide" number
Bonus-eligible % is property-specific, not market-specific. Two cabins on the same Joshua Tree block can come in at 17% and 27% based on amenity package (one has a hot tub, fire pit, outdoor shower; the other doesn't). Market defaults are fine for screening; property-specific analysis is required for closing decisions.
Forgetting the bracket interaction
A $200,000 Year-1 deduction can drop you from a 35% bracket to 24% if the deduction is large enough to consume the higher bracket. The "savings" on the portion that crosses the bracket boundary is at the higher rate. For deductions large relative to AGI, run the marginal rate per dollar of deduction — not a single weighted-average rate.
Ignoring recapture in the hold model
The Year-1 deduction is the easy part. The 5–10 year recapture liability is the hard part — and gets treated as ordinary income (37% cap) on the §1245 portion, not the 25% §1250 cap most investors expect. See our recapture explainer for the full math.
From estimate to filing
An estimate is sufficient for: pre-offer underwriting, "should I stretch on this property" decisions, CPA conversations before closing, and comparison shopping between two finalists. An estimate is not sufficient for: filing the actual §168(k) election on your return. That requires a formal cost segregation study with engineering documentation, line-item asset classifications, and the supporting calculations.
The DepreciMax workflow is built for the pre-offer stage. The free calculator sizes the deal. A $99 photo-based property report gives your CPA a defensible item-by-item estimate closely calibrated to a formal study. The formal study ($5,000–$8,000) comes after closing, before filing. Three steps, three price points, one consistent number from offer to return.
If you're a CPA or tax advisor estimating bonus dep for STR clients, the DepreciMax for Tax Professionals workflow gives you co-branded reports and client-ready outputs without billable engineering time.
Frequently asked questions
How do I calculate bonus depreciation on a short-term rental?
Multiply the purchase price by (1 − land ratio) to get the depreciable basis, then multiply that by the bonus-eligible percentage to get the Year-1 §168(k) deduction. Multiply the deduction by your federal marginal bracket to get the cash tax savings. The DepreciMax calculator auto-fills land ratio and bonus % from zip code or city — you only need to type price and bracket.
What inputs do I need to estimate Year-1 bonus depreciation?
Four numbers: purchase price, land value ratio, bonus-eligible percentage, and federal marginal bracket. Market-typical land and bonus % are auto-filled by zip code in the DepreciMax calculator, so the only inputs you need to type are price and bracket.
What is a typical bonus-eligible percentage for an STR?
For a fully-furnished STR with typical amenities, bonus-eligible % usually falls between 18% and 30% of the depreciable basis. Resort/vacation markets with pools, hot tubs, fire pits, outdoor kitchens trend toward 24–32%. Urban condos without outdoor improvements trend toward 14–20%. Cabins with extensive land improvements top out closer to 28–35%.
How accurate is a bonus depreciation calculator vs. a formal cost segregation study?
A market-defaults calculator gets you within ±10–15% of the formal cost seg number — enough to size a deal pre-offer. A photo-based AI estimate (DepreciMax $99 property report) tightens that to closely calibrated. A formal engineering cost seg study ($5,000–$8,000) is required for filing the deduction with the IRS — but the cheaper estimates are sufficient for underwriting and CPA conversations before closing.
Can I take 100% bonus depreciation on an STR in 2026?
Yes — the One Big Beautiful Bill Act (OBBBA) permanently restored 100% bonus depreciation under §168(k) for property placed in service after January 19, 2025. Before OBBBA, the deduction was scheduled to phase down to 40% in 2025 and zero by 2027. As of 2026, the full Year-1 deduction is available with no scheduled phase-out, provided the STR qualifies under §469(c)(2) and the owner materially participates.
Do I need to materially participate to claim STR bonus depreciation?
Yes — to offset W-2 or active income with the deduction, the IRS requires material participation under §469(h). Common qualifying tests: 100 hours and more than anyone else, or 500 hours total in the activity, in the tax year placed in service. A contemporaneous time log is the standard audit evidence. Without material participation, the deduction is suspended as a passive loss.
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.