Airbnb / Short-Term Rental Cost Segregation
The three positions our estimate uses for this property type, the components a study itemizes in the shorter lives, and an illustrative example from our estimate engine.
Conservative
15%
of building basis excluding land
Middle of the Road
22%
of building basis excluding land
Aggressive
30%
of building basis excluding land
The shares our estimate uses for this property type. What the three positions mean
Expected reclassification range 25% to 40%, midpoint 30%
The comparative band for every property type is SmartCostSeg house judgment used to gauge an allocation against the type's own Conservative, Middle of the Road and Aggressive positions; it is not an IRS threshold, an industry percentile or a published median.
For this property type the Middle of the Road position sits below the expected reclassification range. The range is our comparative band for the audit risk gauge; the three positions are the shares the estimate uses.
The Conservative, Middle of the Road and Aggressive percentages for Airbnb / Short-Term Rental are SmartCostSeg house judgment with no source document behind them.
An Illustrative Example
Illustrative example computed by our estimate engine: purchase price $850,000, land $127,500 at the engine's default share of the price, acquired and placed in service January 1, 2026, so the engine applies a 100% bonus rate. The price and the land share are inputs for this example, not figures for this property type. Results vary with property specifics and your tax situation.
The example assumes an average guest stay of more than 7 days, so the estimate keeps the building on its 27.5 year life. At an average stay of 7 days or less the estimate uses 39 years instead. That is how the estimate works, not a rule of law, and your CPA confirms the life that applies to your property.
Building basis $722,500. First year depreciation without a study $26,273.
| Measure | Conservative | Middle of the Road | Aggressive |
|---|---|---|---|
| Share of the building basis moved | 15% | 22% | 30% |
| Moved to shorter lives | $108,375 | $158,950 | $216,750 |
| First year depreciation with a study | $130,707 | $179,443 | $235,141 |
| Additional first year deduction | $104,434 | $153,170 | $208,868 |
The Middle of the Road position, by class
- Modeled in the 5 year class$111,265
- Modeled in the 15 year class$47,685
- Building on its 27.5 year life$563,550
First year federal tax savings at each bracket, Middle of the Road
- At the 24% federal bracket: $36,761
- At the 32% federal bracket: $49,014
- At the 35% federal bracket: $53,610
- At the 37% federal bracket: $56,673
Federal income tax only. Your CPA confirms your bracket and any state effect.
These savings assume the full deduction can be used this year. Whether it can depends on your tax situation, including the passive activity rules, and your CPA decides. What a passive activity is
The same inputs give the same figures for Single-Family Rental (SFR), Townhouse Rental, Vacation Rental, Furnished Airbnb, Furnished Executive Rental and Furnished Vacation Rental, because they share this property type's three positions, cost split and base life.
What Usually Moves to Shorter Lives
The components a study itemizes in the shorter lives for this kind of building, and confirms on your property. The example above splits by class only.
Itemized in the 5 year class
- Carpet, vinyl and other removable floor coverings
- Kitchen and laundry appliances
- Decorative and accent lighting fixtures
- Electrical branch circuits and outlets dedicated to equipment
- Plumbing connections dedicated to equipment and appliances
- Window treatments (blinds, drapes and hardware)
- Low-voltage security, access-control and data cabling
- Miscellaneous removable finishes and accessories
Itemized in the 15 year class
- Parking lot paving, curbs and striping
- Sidewalks and exterior hardscape
- Landscaping, shrubbery and planting beds
- Site drainage, storm structures and retention
- Fencing, gates and retaining walls
- Site and parking-lot lighting (poles, bases, circuits)
- Swimming pool, spa and pool equipment
What moves your number
- Furnishings value
- Hot tub / deck
- For residential rentals the IRS says appliances, carpeting and furniture are 5 year property, and roads, fences and shrubbery (if depreciable) are 15 year property. Source: IRS Publication 527 (2025), chapter 2, Property Classes Under GDS
The Building and Its Rules
The average guest stay also matters to the passive activity rules. The rule below is the one the wizard asks about, and your CPA applies it with the other tests in our guide.
- An activity involving the use of tangible property is not a rental activity for a tax year if the average period of customer use is seven days or less. Source: Temp. Treas. Reg. section 1.469-1T(e)(3)(ii)(A)
Check your average stayThe other passive activity tests, with their sources
The building's life is a separate question. The two rules below come from different places, no source we publish applies the 30 day figure to the building's life, and your CPA confirms the life that applies to your property.
- A building is residential rental property only if 80 percent or more of its gross rental income is from dwelling units. A dwelling unit does not include a unit in a hotel, motel or other establishment where more than one half of the units are used on a transient basis. Section 168 does not define transient basis or state a number of days. Source: IRC section 168(e)(2)(A)(i) and (ii)(I)
- The 30 day figure comes from Treas. Reg. 1.48-1(h)(2)(ii), an investment credit regulation on hotel and motel property, not from section 168. It says accommodations are used on a transient basis if the rental period is normally less than 30 days. Paragraph (h)(1)(i) of the same regulation contains no 30 day language. Source: Treas. Reg. section 1.48-1(h)(2)(ii)
Start With Your Own Property
The wizard asks the questions for this property type and routes it to the right lane.