For short-term rental owners
Turn your rental into one of the best tax shelters you own.
Short-term rentals get a tax treatment long-term rentals don’t. Paired with a cost segregation study, it can turn a big chunk of your property into a first-year deduction, often against your active income. Here’s how it works, with real numbers.
Get a free analysisWhat is cost segregation?
Depreciate faster, not slower.
Normally a rental building depreciates over 27.5 or 39 years: a slow trickle. A cost segregation study has engineers break the property into its parts, such as flooring, cabinetry, appliances, lighting, landscaping, and pool equipment, and reclassify them into 5, 7, and 15-year lives. Those shorter-life assets qualify for accelerated and first-year bonus depreciation, so instead of a trickle you get a flood of deductions in year one.
The short-term rental advantage
Why STRs beat long-term rentals at tax time.
This is the part most owners don’t know about.
- It can offset active income. When the average guest stay is 7 days or fewer and you materially participate, the IRS doesn’t treat it as a passive rental. The accelerated depreciation can offset active income, including W-2 and business income, not just rental profit.
- No “real estate professional” status required. Long-term rental owners usually need REP status to unlock these losses. STR owners generally don’t: the shorter-stay rule does the heavy lifting.
- Material participation is very doable. Meeting one of the IRS tests, for example, being the person most involved in the rental, or 100+ hours with no one involved more, is realistic for an engaged owner, and Cardo’s reporting helps you document it.
What it can be worth
Real numbers, first year.
Illustrative only. Figures assume a cost-seg study reclassifies roughly 17–18% of the purchase price into short-life assets eligible for bonus depreciation, and a 37% marginal tax rate. Your actual results depend on the property, your tax situation, and current law.
Already own the property?
You didn’t miss the window.
Bought your rental last year, or five years ago, and never did a study? You can still run a look-back cost segregation study and claim all the depreciation you should have taken, all at once, on this year’s return. There’s no need to amend past returns; your CPA files a single change-of-accounting form (Form 3115). For many owners it’s the biggest single deduction they’ll take this year.
How it works
From analysis to savings.
- 1
Free analysis
Tell us about the property. A cost-seg specialist estimates your potential first-year deduction at no cost.
- 2
The study
Engineers itemize and reclassify assets, such as finishes, fixtures, appliances, and land improvements, into 5, 7, and 15-year lives.
- 3
File
Your CPA applies the accelerated depreciation on this year’s return, or a look-back study catches up prior years with no amended returns.
- 4
Keep more
The deductions lower your taxable income, freeing up cash to reinvest in the property or your next one.
Free cost-seg analysis
See what your property could save.
Share a few details and we’ll connect you with a cost segregation specialist for a no-cost estimate of your first-year deduction. Fields marked * are required.
This page is general information, not tax, legal, or accounting advice. Cost segregation results and short-term rental tax treatment depend on your specific circumstances and current tax law. Please consult your CPA or tax advisor. Cardo can connect you with a qualified cost segregation specialist.
Since 2013
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