100% Bonus Depreciation Is Back: What the OBBBA Means for STR Investors

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and it changed everything for short-term rental investors. If you haven’t heard about it, you’re not alone — but you need to understand what it means for your STR strategy.

What the OBBBA Changed

The OBBBA permanently reinstated 100% bonus depreciation for qualified property acquired after January 19, 2025. This reversed the Tax Cuts and Jobs Act (TCJA) phase-down that was reducing bonus depreciation by 20 percentage points each year.

Here’s what the landscape looked like before the OBBBA:

2023: 80% bonus depreciation
2024: 60% bonus depreciation
2025: 40% bonus depreciation (where we were headed)
2026: 20% bonus depreciation (projected)
2027+: 0% bonus depreciation (projected)

The OBBBA eliminated the phase-down entirely. For property acquired after January 19, 2025, bonus depreciation is back to 100% — permanently.

Why This Matters for STR Investors

Bonus depreciation allows you to immediately expense the cost of certain property improvements in the first year, rather than depreciating them over 5, 7, or 15 years. When combined with cost segregation studies, this creates substantial first-year deductions that can offset high W-2 income through the STR tax strategy.

The financial impact is enormous. Consider a typical STR property where a cost segregation study identifies $400,000 in improvable personal property:

Under 40% bonus depreciation: $160,000 first-year deduction
Under 100% bonus depreciation: $400,000 first-year deduction

For a taxpayer in the 35% marginal bracket practicing material participation, that’s a difference of $84,000 in federal tax savings in year one.

The Critical Dates

The acquisition date that determines eligibility is when you enter into a binding written contract to acquire the property — not the closing date, not when it’s placed in service. This matters because:

If your binding contract was executed on or before January 19, 2025: You’re subject to the TCJA phase-down rules (40% for 2025).

If your binding contract was executed after January 19, 2025: You qualify for 100% bonus depreciation.

What About Properties Purchased in Late 2024?

Here’s where it gets interesting. Even if you signed a purchase contract in late 2024, you might still qualify for 100% bonus depreciation if certain contingencies weren’t satisfied until after January 19, 2025.

Standard contingencies like:

Inspection completion
Financing approval
Appraisal completion
Seller repairs

If any of these contingencies remained unsatisfied as of January 19, 2025, the IRS may treat the acquisition date as when the final contingency was satisfied — potentially pushing you into the 100% bracket.

What This Means for Your STR Strategy

If You’re Already an STR Investor

Review your 2025 acquisitions. If you purchased property in early 2025, you may be entitled to significantly more depreciation than initially calculated. This could affect:

Your 2025 tax position
Whether to file an extension to maximize planning time
The value of commissioning a cost segregation study

If You’re Considering STR Investment

The calculation just changed dramatically. The difference between 40% and 100% bonus depreciation fundamentally alters the return profile of STR investments, especially for high-income earners seeking immediate tax benefits.

If You’re Working with a “General Practice” CPA

They likely don’t know about the OBBBA. This level of tax law change requires specialized knowledge. Most generalist firms are still calculating depreciation under the old TCJA phase-down rules because they haven’t updated their processes for the OBBBA changes.

The Bigger Picture

The OBBBA didn’t just restore 100% bonus depreciation — it made it permanent. Unlike the original TCJA provisions that were set to expire, these rules are written to continue indefinitely.

This creates long-term certainty for STR tax planning. You can enter the market knowing that 100% bonus depreciation will be available for future acquisitions, not just current ones.

What You Should Do

Verify your acquisition dates. If you purchased property in 2025, confirm whether your binding contract and all contingencies were satisfied before or after January 19.
Recalculate your depreciation. If you qualify for 100% bonus depreciation, your cost segregation study may deliver significantly more value than initially projected.
Consider the planning timeline. If you’re in the market for STR property, understand that acquisitions after January 19, 2025 qualify for the full 100% benefit.
Work with a specialist. The OBBBA is complex legislation with specific requirements. General practice CPAs may not be familiar with the acquisition date rules or binding contract exceptions.

Looking Forward

The OBBBA represents the most significant change to STR tax strategy since the seven-day average stay rule was established. It restores the immediate tax benefits that made STR investment attractive for high-income earners while providing permanent certainty for long-term planning.

For STR investors, the message is clear: the tax landscape just became substantially more favorable. The question is whether your current tax professional understands the new rules well enough to help you take advantage of them.

This analysis is based on the One Big Beautiful Bill Act (P.L. 119-21) as signed into law on July 4, 2025. Tax law is complex and fact-specific. This content is for informational purposes and should not be relied upon as tax advice without professional consultation.