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Short-term rental tax deduction calculator

Enter a purchase price and see a rough first-year deduction from cost segregation plus bonus depreciation, and what it offsets if you materially participate. Assumptions shown, nothing hidden.

Estimated first-year deduction
$90,000
$21,600
estimated first-year tax offset (if you qualify)

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How this is calculated

Three assumptions, applied in order. They are rough on purpose, and they are the same three the homepage estimator uses.

  1. 80% building, 20% land. Land is never depreciable, so it comes out first. The real split comes from your assessment or appraisal and varies a lot by market.
  2. 25% reclassified to short-life property. A cost-segregation study moves things like appliances, flooring, fixtures and land improvements out of the long depreciation schedule. A quarter of building value is a common rough outcome; yours could be well above or below it.
  3. First-year bonus depreciation at 100%, applied to the reclassified amount. Legislation enacted in mid-2025 made 100% bonus permanent for property acquired after January 19, 2025. Property acquired on or before that date stays on the older phase-down, keyed to the year it was placed in service (2023: 80%, 2024: 60%, 2025: 40%, 2026: 20%). "Acquired" has its own rules, including binding-contract tests, so confirm which regime you are in with your CPA.

The tax offset line then multiplies that deduction by your marginal rate, but only if you materially participate. That is not a formality. Rental losses are passive by default under IRC Section 469, and passive losses cannot offset wage income. A short-term rental with an average period of customer use of 7 days or fewer is not automatically a rental activity for that test, which is the gate most STR operators are trying to clear. Miss it and the deduction is suspended, not lost.

This is an estimate, not advice. It is not a cost-segregation study and RentReel is not a licensed tax preparer. Use it to decide whether the number is big enough to talk to a CPA about. Then talk to a CPA.

Questions

How is the first-year deduction estimated?

The calculator takes the purchase price, assumes 80% of it is the building rather than the land, assumes a cost-segregation study reclassifies about 25% of that building value into short-life property, and applies 100% first-year bonus depreciation to that reclassified amount. Those three assumptions are shown on the page and are deliberately rough. A real study produces a real number and will differ.

Why does material participation change the result?

Rental losses are passive by default under IRC Section 469, and passive losses cannot offset wage or business income. A short-term rental whose average period of customer use is 7 days or fewer is not automatically a rental activity for that test, so clearing that gate and then materially participating is what allows the deduction to offset other income. Without material participation the deduction still exists, but it is suspended rather than usable this year.

Is this a cost segregation study?

No. A cost-segregation study is an engineering-based analysis of an actual property that produces a defensible allocation. This is a back-of-envelope estimate to show whether the number is large enough to be worth a study at all.

Does RentReel file my taxes?

No. RentReel is bookkeeping software. It keeps tax-ready books and produces a per-property Schedule E your CPA files from. RentReel is not a licensed tax preparer and nothing here is tax advice.

Do I need an account to use this calculator?

No. There is no signup, no card, and nothing is stored unless you choose to email yourself the result.

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