Section 179 or bonus depreciation on an Airbnb? When the older rule still matters in 2026

Can you take Section 179 on Airbnb furniture?

Yes, if the rental is a trade or business you actively run. The statute defines section 179 property as tangible §1245 property "acquired by purchase for use in the active conduct of a trade or business," and then excludes "any property described in section 50(b) (other than paragraph (2) thereof)." Paragraph (2) of §50(b) is the lodging rule: property used predominantly to furnish lodging. Until the 2017 law (P.L. 115-97, §13101(c)) added those five words in parentheses, furniture in a rental home was shut out of §179 unless it fit the hotel and motel exception. The change applies to property placed in service in taxable years beginning after December 31, 2017.

IRS Publication 946 still lists "certain property used predominantly to furnish lodging" among the property that does not qualify, followed by "except as provided in section 50(b)(2)." That wording reads like a ban if you skim it. The statute is the controlling text, and it now leaves lodging property in.

Two other gates matter for STR owners.

• The rental has to be a trade or business. Treas. Reg. §1.179-2(c)(6)(i) says property "held merely for the production of income" does not qualify. A short-term rental where you handle guests, cleaning and turnovers is often a §162 business. A house leased to one tenant for a year often is not. The regulation also requires active conduct, which it describes as meaningful participation "in the management or operations of the trade or business."
• The noncorporate lessor rule. §179(d)(5) blocks §179 on property an individual buys and leases out, unless the lease term is under half the property's class life and, in the first 12 months, the owner's §162 deductions for the property (not counting rent or reimbursed amounts) exceed 15% of the rental income it produces. If a guest stay counts as a lease at all, a three-night booking is far under half of any furniture class life, and an STR's cleaning, supplies, utilities and platform fees usually clear 15% of revenue. It is still a computation, and the allocation belongs to your CPA.

What is the difference between Section 179 and bonus depreciation?

Both let you deduct most or all of an asset's cost in the year it goes into service instead of spreading it over 5, 7 or 15 years. They get there under different rules.

The 2026 dollar figures come from Rev. Proc. 2025-32, section 3.24, which indexes the $2,500,000 and $4,000,000 amounts that the 2025 law (P.L. 119-21) wrote into §179(b). An STR owner furnishing a few houses will never get near either number. The limit that matters in practice is the income limit.

Which one should an STR owner use in 2026?

Bonus, by default, for furniture, appliances, electronics and anything a cost segregation study moves into 5, 7 or 15-year property. It applies without an election, it does not care whether the rental is a business, and it does not cap the deduction at your income. Section 179 adds something only when one of the branches below applies.

One case falls outside the chart. Bonus is all or nothing within a class, so if you want full expensing on the furniture but regular depreciation on the TVs and appliances that sit in the same 5-year class, you elect out of bonus for that class and use §179 on the items you want expensed. People do this to keep deductions for a year with a higher expected tax rate. It is a planning choice, not a common one.

Does Section 179 work if my STR loses money?

Section 179 cannot exceed your taxable income "derived from the active conduct by the taxpayer of any trade or business" for the year, per §179(b)(3)(A). Anything over that carries forward. For someone with a W-2 job this limit rarely binds, because Treas. Reg. §1.179-2(c)(6)(iv) counts wages, salaries and tips as income from the trade or business of being an employee. A nurse with $90,000 of wages and a money-losing rental can still elect $30,000 of §179 as far as this limit goes.

Clearing the §179 income limit does not make the rental loss usable. That is a separate question under §469. If the property averages more than 7 days per stay, or you do not materially participate, the loss is passive and waits until you have passive income or sell. The same is true of a loss created by bonus. Neither election gets around the passive rules. The STR loophole playbook covers the 7-day test and the hours, and the material participation guide covers the seven tests.

Can I use Section 179 on a new roof or HVAC for a short-term rental?

Possibly, and this is the clearest case where §179 beats bonus. Section 179(f) lets you elect to treat "qualified real property" as section 179 property. It covers qualified improvement property, plus four improvements "to nonresidential real property placed in service after the date such property was first placed in service": roofs, HVAC, fire protection and alarm systems, and security systems. None of the four is bonus-eligible on its own, because each is part of a 39-year building.

The catch is the word nonresidential. Under §168(e)(2)(A), a building is residential rental property if 80% or more of its rent comes from dwelling units, and a dwelling unit "does not include a unit in a hotel, motel, or other establishment more than one-half of the units in which are used on a transient basis." Many practitioners read that to mean a house rented in short stays falls outside the residential definition and is depreciated over 39 years. Our cost segregation guide covers that 27.5 versus 39-year question. If your CPA treats the building as 39-year nonresidential, the roof can be a §179 candidate. If the building is 27.5-year residential, it is not, because §179(f) only reaches roofs on nonresidential property.

Here is the difference on a hypothetical $24,000 roof replaced and placed in service in June 2026 on a rental that has been operating since 2023:

Two costs come with the bigger number. The roof becomes recapture property: §1245(a)(3)(C) pulls real property with §179 adjustments into §1245, so the expensed amount is taxed as ordinary income when you sell, rather than as unrecaptured §1250 gain capped at 25%. And the election is made on the return, so it has to be made on purpose. Whether the work is a roof replacement (an improvement) or a repair you can deduct outright is a separate question, covered in repairs vs improvements.

What if my state does not allow bonus depreciation?

Then §179 can produce a state deduction that bonus cannot. California is the documented example: the FTB 3885A instructions say California does not conform to §168(k), and cap §179 at $25,000, reduced once §179 purchases pass $200,000. Other states also decouple from bonus in their own ways. Check your state's depreciation form before assuming federal and state match.

Take a hypothetical $30,000 of furniture and appliances for a California owner's new STR that opens in December 2026, with enough active income to cover the §179 election. Federally the deduction comes out the same either way. At the state level it does not.

The $1,500 row is the mid-quarter convention at work. When more than 40% of a year's depreciable personal property is placed in service in the last quarter, every item that year uses the mid-quarter tables, and 5-year property placed in service in October to December gets 5% in year one instead of 20%. Publication 946 says the 40% test counts basis after §179 but not after bonus, so a December opener who skips both elections lands here. Whether a particular item qualifies for California's version of §179 is a question for a California preparer. The table shows the shape of the choice, not a filing position.

What happens to Section 179 if I stop renting short-term?

You can owe some of it back. Treas. Reg. §1.179-1(e) says that if §179 property is "not used predominantly in a trade or business" at any time before the end of its recovery period, you recapture the benefit: the amount expensed minus the depreciation you would have taken without §179. For furniture that window is 5 years.

Moving into the house yourself can trigger it. So can switching to a year-long lease, which may turn the activity from a business into an investment, or enough family nights that business use of the furniture drops to half or less (the 14-day rule post covers how personal days are counted). Bonus has no equivalent rule outside listed property such as vehicles, which is one more reason it is the default.

How do I elect Section 179 or opt out of bonus?

Both happen on Form 4562, the depreciation form attached to your return behind Schedule E.

• Section 179 goes in Part I. Under §179(c)(1) the election has to name each item and the portion of its cost you are expensing. Publication 946 allows the election on an original return, even a late one, or on an amended return filed within the normal time limit, and allows revoking it the same way. Once revoked, the revocation is permanent.
• Bonus is automatic. Opting out is done by class with a statement on the return, and under §168(k)(7) it can be revoked "only with the consent of the Secretary." Electing out of bonus by accident is harder to undo than skipping §179.

Depreciation lands on Schedule E Line 18. Whether Schedule E or Schedule C is the right home for your rental is covered in Schedule E vs Schedule C, and it matters here too: an STR that provides hotel-like services and files on Schedule C is the easiest case for the trade-or-business requirement.

What to settle before December 31

1. Get the property placed in service in 2026 if you want any 2026 deduction. Neither bonus nor §179 starts before the rental is ready and available, which is the subject of when an Airbnb is placed in service.
2. Keep itemized invoices for furniture, appliances and any roof or HVAC work, with dates. §179 is elected item by item, and a single "furnishing package" line is hard to split later.
3. Ask your CPA two questions: is the building 27.5-year or 39-year, and is the rental an actively conducted trade or business? The answers decide whether §179 is even available.
4. If you live in a state that decouples from bonus, ask whether a §179 election on part of the purchase changes your state return.
5. Keep the hours log going. Neither election helps a passive loss, and the material participation log is what decides that.

The rest of the year-end list is in the Q4 tax-season checklist, and the year-one versus year-two question for a cost seg study is in cost seg timing.

Frequently asked questions

Can you take Section 179 on furniture in a short-term rental?

Yes, for property placed in service in tax years beginning after 2017, if the rental is an actively conducted trade or business. Before then, §179(d)(1) excluded property used predominantly to furnish lodging. The 2017 tax law changed the exclusion to read "other than paragraph (2) thereof," which leaves lodging property eligible. A rental held merely for the production of income still does not qualify.

Is bonus depreciation or Section 179 better for an Airbnb in 2026?

Bonus is usually the default. For property acquired after January 19, 2025 it is 100%, applies without an election, has no income limit and does not require a trade or business. Section 179 helps when your state does not follow bonus, when the purchase is a roof, HVAC, fire protection or security system on a building treated as nonresidential, or when you want to expense some items in a class and not others.

What is the Section 179 limit for 2026?

Rev. Proc. 2025-32 sets the 2026 limit at $2,560,000, reduced dollar for dollar once the cost of section 179 property placed in service during the year exceeds $4,090,000. The deduction is also limited to taxable income from the active conduct of a trade or business, which includes wages, and any excess carries forward.

Can Section 179 be used on a roof for a rental property?

Only if the building is nonresidential real property. Section 179(f) covers roofs, HVAC, fire protection and alarm systems, and security systems added to nonresidential real property after it was first placed in service. A short-term rental may be nonresidential if transient use takes it outside the §168(e)(2) dwelling unit definition, which is a facts question for your CPA. A roof on a 27.5-year residential rental does not qualify.

Do I have to pay back Section 179 if I stop renting my Airbnb?

Possibly. Treas. Reg. §1.179-1(e) requires recapture if the property stops being used predominantly in a trade or business before the end of its recovery period, which is 5 years for furniture. Moving in, converting to a long-term lease or heavy personal use can trigger it. The recaptured amount is what you expensed minus the depreciation you would otherwise have taken.

Related deep dives

• Cost segregation for STR operators: what a study reclassifies, and the 27.5 versus 39-year question.
• Cost seg timing, year 1 vs year 2: which bonus rate applies and what a late study costs.
• When is a new Airbnb placed in service? Why closing by December 31 is not enough.
• Repairs vs improvements: when a roof is a deduction and when it is an asset.
• The STR tax loophole, full §469 playbook: whether the deduction can offset W-2 income.
• How to track §469 material participation: the seven tests and what the log needs.
• Personal use days and the 14-day rule: how family nights are counted.
• Schedule E line by line: where Line 18 depreciation and Form 4562 meet.
• Schedule E vs Schedule C for an Airbnb: when services change the form.

Sources

• IRC §179: the (b)(1) and (b)(2) dollar limits, the (b)(3) income limit and carryover, the (c) item-by-item election and revocation, the (d)(1) definition with the §50(b) exclusion "other than paragraph (2) thereof," the (d)(5) noncorporate lessor rule, the (d)(10) recapture authority, (f) qualified real property, and the effective-date notes for P.L. 115-97 §13101 and P.L. 119-21 §70306.
• Rev. Proc. 2025-32, section 3.24: the 2026 §179 limit of $2,560,000 and phase-out threshold of $4,090,000.
• Treas. Reg. §1.179-2(c)(6): trade or business has the §162 meaning, property held for the production of income does not qualify, active conduct means meaningful participation, and employee wages count toward the income limit.
• Treas. Reg. §1.179-1(e): recapture when property is no longer used predominantly in a trade or business.
• IRC §168: the (e)(2) residential rental definition and its transient-use exclusion, the (k) special allowance, and the (k)(7) election out by class.
• IRC §1245(a)(2)(C) and (a)(3)(C): §179 deductions are treated as amortization, which brings real property with §179 adjustments into §1245 recapture.
• IRS Publication 946, How To Depreciate Property: excepted property, the leased property tests, the business income limit, the election on original or amended returns, revocation, qualified section 179 real property, and the mid-quarter convention's 40% test.
• FTB 3885A instructions (2025): California does not conform to §168(k), and the California §179 maximum is $25,000 with a $200,000 threshold.

Disclaimer

RentReel is bookkeeping software, not tax advice. The $24,000 roof and $30,000 furniture examples use made-up round numbers to show the mechanics. Rules and limits are cited to the statutes, regulations and IRS and FTB publications current as of October 2026. Whether your rental is a trade or business, whether its building is 27.5 or 39-year property, and whether an election makes sense are questions for a CPA, ideally one who works with short-term rentals.