Photo: Center for American Progress
On July 4, 2025, the Big Beautiful Bill was officially signed into law, bringing a wave of tax benefits designed to support small business owners and real estate investors—including short-term rental (STR) hosts. If you operate on platforms like Airbnb or Vrbo, these changes could be a game-changer for your bottom line.
Here’s a breakdown of what the bill includes and how it could directly benefit hosts and investors in the STR space.
Key Highlights of the Law
- Bonus Depreciation Reinstated
Full 100% bonus depreciation is back, allowing STR owners to deduct the full cost of eligible property assets—like furniture, appliances, and certain improvements—in the year they’re placed into service. This applies retroactively to assets acquired after January 20, 2025, and continues through the end of 2029.
- Qualified Business Income (QBI) Deduction Made Permanent
The 20% deduction on net rental income for qualifying STR businesses is now a permanent part of the tax code. For hosts meeting the right criteria, this could mean a substantial reduction in taxable income.
- Expanded Loss Offsets
Certain STR losses can now be used to offset other types of income—like wages—if the host meets active participation rules. This change allows more flexibility for newer or part-time hosts to benefit, especially during years when startup costs are high.
Important Rules to Know
Material Participation Matters
To fully benefit from these deductions, STR owners must materially participate in managing their property. This typically means spending a significant amount of time—around 250 hours per year—on tasks like guest communication, maintenance, pricing, or check-ins.
What Qualifies for Bonus Depreciation?
Not everything can be written off immediately. Qualifying assets usually include items with a useful life of 20 years or less, such as:
- Furniture and fixtures
- Appliances
- Interior upgrades (like countertops or flooring)
Structural components like roofs or foundations typically don’t qualify unless they fall under specific improvement classifications.
What This Means for Hosts and Investors
- Faster Return on Investment
The ability to write off large capital purchases in year one means more money stays in your pocket. This is especially helpful for new listings needing furnishings or renovation.
- Better Tax Efficiency
With the QBI deduction now permanent, long-term planning becomes easier. STR operators can reduce their taxable income significantly, giving them more control over their profits.
- Flexibility with Losses
In the past, STR losses couldn’t always be applied to other forms of income. With this change, eligible hosts can now use those losses to reduce their overall tax bill—making even low-earning or first-year listings more financially forgiving.
How to Prepare
- Work with a Qualified Tax Professional
These new rules can add complexity. A real estate-savvy CPA will help you take full advantage while staying compliant. - Track Your Hours and Activity
Keep detailed logs of your STR involvement throughout the year to prove material participation if needed. - Consider a Cost Segregation Study
For larger investments, a cost segregation analysis can identify which parts of your property can be depreciated faster. - Time Purchases Wisely
Planning large upgrades during this bonus depreciation window (2025–2029) allows you to maximize deductions upfront.
A Few Things to Watch Out For
- Passive vs. Active Status: If you outsource all your STR operations, you may not qualify for the full range of benefits.
- Recordkeeping: Sloppy documentation can lead to missed deductions or issues during audits.
- Growing Competition: These tax incentives may encourage more investors to enter the STR space, especially in hot markets. Positioning your property effectively becomes more important than ever.
The Bottom Line
The Big Beautiful Bill is a major win for STR hosts who treat their business seriously. With smarter tax benefits, stronger cash flow potential, and long-term planning advantages, this law could reshape how investors grow and manage their portfolios.
But the key is preparation. Know the rules, document your activity, and plan ahead.