What Makes a Property More Depreciable? Investor’s Guide to Bigger STR Tax Deductions

[AJ Wong]

With the STR Loophole back in the mix, I've been having A LOT more casual conversations (from the gym to the dinner table) about accelerated depreciation! Especially for first time investors - I thought for many (including myself) it could be helpful to start at the very beginning..Depreciation is a paper loss that can offset real income. But not all properties are created equal when it comes to depreciation and often times especially with first time investors So, what exactly makes a property more depreciable? 

Low Land-to-Improvement Ratio = More to Depreciate

Only the improvements on a property are depreciable — not the land. That means the lower the land value relative to the building and its components, the better.

Example:

• Property A: $500K total price

• $100K land / $400K improvements → $400K depreciable

• Property B: $500K total

• $300K land / $200K improvements → Only $200K depreciable

Tip: Look for areas or property types where the improvement value is high relative to land — especially helpful in suburban or rural markets.

Short-Term Rentals Open the Door to Bonus Depreciation

If your property qualifies as a short-term rental (STR) and you materially participate, you're not bound by the traditional 27.5-year depreciation schedule. Instead, you can unlock 100% bonus depreciation on assets with a useful life under 20 years.

This includes:

• Furniture & appliances • Flooring • Window coverings • Landscaping & outdoor lighting • Fencing, driveways, and patios

These can often make up 20–35% of the purchase price — all potentially depreciated in Year 1 with a cost segregation study.

Cost Segregation Friendly Features = Faster Write-Offs

Certain property features allow you to break down the building into faster-depreciating components:

Look for:

• High-end finishes (luxury fixtures, lighting, smart tech) • Pools, patios, outdoor kitchens

• Detached garages, ADUs • Upgraded appliances and built-ins

The more non-structural components a property has, the more value a cost segregation study can carve out into 5-, 7-, and 15-year buckets.

Newer or Recently Renovated Homes = Richer Depreciation

New builds or heavily renovated homes often pack in:

• New HVAC systems • High-efficiency appliances • Premium flooring, tile, and cabinetry

Not only are these attractive to guests — they’re also gold for depreciation, since they’re assigned shorter useful lives and can be depreciated more quickly.

Higher Purchase Price = Bigger Deductions

It sounds obvious, but worth repeating: the more expensive the property, the more there is to depreciate.

A $1M STR might yield $200K–$300K+ in bonus depreciation in Year 1. For high earners, that can offset a significant chunk of W-2 or 1099 income.

What Hurts Depreciation Potential?

Not all properties offer the same tax advantages. Here’s what might limit your write-offs:

• High land value • Older homes with little depreciable value left • Raw land or Acreage • Properties with minimal improvements or personal property

As more investors become aware of the renewed bonus depreciation for 2025, 2026 & 2027 I expect the volume and interest for prime STR investment properties to continue to intensify. Hopefully this gives a little insight that supports the search :)

[Mike Grudzien]

AJ does it again!  Thanks for the analysis!