Cost segregation for Airbnb owners

Rules and figures on this page are stated as of October 7, 2026.

How cost segregation works on a vacation rental

Without a study, most owners split the price between land and building and depreciate the building over its full recovery period. A study looks at what is actually in and around the house and assigns each part its own class. Items a guest uses (beds, sofas, dishes, appliances) are generally 5-year property. Improvements to the land (landscaping, a driveway, fencing) are generally 15-year property. The rest stays with the building.

The building's own recovery period for a short-stay rental (27.5 or 39 years) is a separate determination. It does not follow automatically from the length of guest stays, and your reviewer and CPA make that call.

Worked example 1 (hypothetical): cabin bought in 2025

Illustrative numbers only. Not a real property or a real study. An owner buys a furnished cabin for $500,000 in March 2025 under a contract signed that month, and starts renting it in April 2025. Land is estimated at $100,000 from the county assessor's ratio.

Because the cabin was acquired and placed in service after January 19, 2025, the $67,000 of 5- and 15-year property can qualify for 100% bonus depreciation in 2025, on top of the building's regular first-year depreciation. That is an estimate of depreciation, not of tax saved. How much of it reduces this year's tax depends on whether the loss is usable, which is a question for your CPA.

Flooring, cabinets and built-in items are left in the building here on purpose. Whether they can be separated depends on how they are attached and used, and a reviewer decides that in a full study. A built-in hot tub can also be treated differently from a portable one.

Worked example 2 (hypothetical): contract signed before the cutoff

Illustrative only. Same cabin, but the purchase contract became binding in December 2024 and the owner closed and started renting in February 2025. The acquisition date is generally the date the binding contract was signed, so the 2017 law phase-down applies: 40% bonus for property placed in service in 2025. On $67,000 of short-life property that is $26,800 of bonus depreciation, with the rest depreciated over 5 and 15 years. Whether a real estate contract was "binding" on a given date is a facts-and-law question for your CPA and reviewer.

Bonus depreciation in 2025 and 2026

• Acquired and placed in service after January 19, 2025: 100% bonus, with no scheduled phase-down (P.L. 119-21 §70301, enacted July 4, 2025; IRS Notice 2026-11, January 14, 2026).
• Acquired on or before January 19, 2025 (including under a binding contract signed by then): the prior phase-down applies, 40% for property placed in service in 2025 and 20% in 2026.
• Election: for the first tax year ending after January 19, 2025, a taxpayer can elect 40% instead of 100%. Owners can also elect out of bonus for a whole class of property in a year.
• Recovery periods and tables follow IRS Publication 946 (2025 revision) and the IRS Cost Segregation Audit Techniques Guide.

Does every Airbnb qualify?

No. Any rental you own and depreciate can have a study, but a study only helps if the extra deduction is usable and the numbers justify the fee. Common reasons it doesn't fit:

• The loss is passive. If the rental is passive for you and you have no passive income, the loss is generally suspended and carried forward. See the short-term rental tax rules.
• Heavy personal use. Using the home more than 14 days, or more than 10% of the days it rents, limits deductions.
• Small basis. On an inexpensive property the fee can outweigh the benefit.
• Selling soon. Recapture on sale can take back much of the benefit.
• Outside our scope. Seggy's flat fee covers a defined scope of short-term rentals. If a property needs an inspection or documents we can't get, we'll say so before you pay.

Recapture when you sell

Depreciation lowers your basis. When you sell, gain up to the depreciation taken on 5-year property (including bonus) is generally taxed as ordinary income under §1245. Gain from building depreciation is generally taxed at up to 25%. A 1031 exchange covers real property only, so the personal-property part may still be taxed. A study mostly shifts when you take deductions; ask your CPA how that plays out for your hold period.

Frequently asked questions

Can I do a study on a rental I bought a few years ago?

Usually yes. A look-back study is typically claimed with Form 3115 as a change in accounting method, without amending old returns. Your CPA files it.

Do the furnishings I bought separately count?

Furnishings bought separately are usually already their own assets on your return. A study focuses on what came with the purchase price.

Is a hot tub 5-year property?

A portable, plug-in hot tub is generally personal property. A built-in spa tied into the structure or site may be classed differently. A reviewer decides based on how it is installed.

What about flooring and cabinets?

Sometimes they can be separated, sometimes they belong with the building. That depends on attachment and use, and a reviewer decides in a full study.

Will a study get me audited?

No one can promise audit outcomes. A study that documents its method, reconciles to your purchase price and explains each classification is what the IRS audit guide looks for.