Bonus Depreciation house hack STR

Colorado Springs, Colorado
Short-Term & Vacation Rental Discussions
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Bonus Depreciation house hack STR

Caleb Shupe
Member since 2024 · 4 posts · 2 votes

Hi everyone! We recently had our first STR over the summer of 2025 which was in the basement of our current residence. We converted the walk out basement and added a kitchen and renovated. Now that it is tax season, we were told to do a cost seg by our agent who is an investor and saw lots of posts and podcasts about it, and then give it to our CPA to claim 100% bonus depreciation for 2025 on the property.

We paid for the cost seg and sent it over, but our CPA is saying that since it was our primary residence for the entire year, and we only rented it for the summer as a STR, that it would only qualify for around 25% bonus depreciation. Has anyone run into this before, I know the whole bonus depreciation is semi new but everything we heard about sounded like a great tax strategy, weird to see that us living here seems to be a detriment to that strategy. Thanks in advance for your replies.

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  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    7mo

    Can you explain the make up of the units? How many units are there? How many units were STR vs LTR?

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    • Caleb Shupe
      OP
      Member since 2024 · 4 posts · 2 votes
      7mo
      Quote from @Aaron Zimmerman:

      Can you explain the make up of the units? How many units are there? How many units were STR vs LTR?

      We lived in the entire property in 2025 until May 21st, then we only lived in the upstairs unit until the end of September 2025 when we were renting the downstairs unit as a STR. The rest of the year (October-December) we again lived in the entire property. So one of the units was a STR for 5 months, and we lived in the property the whole year in the upstairs unit and the downstairs unit depending on whether or not we were renting it as a STR.
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    • Aaron ZimmermanBusiness Member
      Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
      7mo

      @Caleb Shupe got it . So what I'm hearing is that none of the property was LTR correct? 

      Also - how big is the downstairs unit compared to the unit you're living in in SF and bedrooms? 

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    • Caleb Shupe
      OP
      Member since 2024 · 4 posts · 2 votes
      7mo
      Quote from @Aaron Zimmerman:

      @Caleb Shupe got it . So what I'm hearing is that none of the property was LTR correct? 

      Also - how big is the downstairs unit compared to the unit you're living in in SF and bedrooms? 


       Its about half, so the downstairs is about 800 sq ft with 2 bed 1 bath, same as upstairs.

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    • Aaron ZimmermanBusiness Member
      Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
      7mo

      @Caleb Shupe to me, id probably wait until 2026 to do the cost seg. This is a bit messy due to the personal days in the unit you're currently renting. 

      Please note this is not tax advice and is not intended to be relied on as such. 

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  • Caleb Shupe
    OP
    Member since 2024 · 4 posts · 2 votes
    7mo

    We lived in the entire property in 2025 until May 21st, then we only lived in the upstairs unit until the end of September 2025 when we were renting the downstairs unit as a STR. The rest of the year (October-December) we again lived in the entire property. So one of the units was a STR for 5 months, and we lived in the property the whole year in the upstairs unit and the downstairs unit depending on whether or not we were renting it as a STR.

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  • Trent Reeve
    Atlanta · Member since 2022 · 710 posts · 640 votes
    7mo

    I'm no CPA, but i believe you cannot get 100% cost seg as you didnt rent the entire property. You would likely only be able to claim a portion. Sounds like maybe your CPA did the % based on sq ft.

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  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    7mo

    No expert but I didnt know you could cost seg your residence based on renting it part time and only part of the house.  Interesting.

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  • Sagiv O.
    Real Estate Investor · Austin, TX · Member since 2017 · 81 posts · 19 votes
    6mo

    Your CPA is actually on the right track here. The 25% figure they gave you is consistent with how bonus depreciation works for a property that was partly used for personal purposes during the same year it was rented.

    The rough math: if the unit was STR for approximately 5 months (May-September) out of 12, the time-based rental allocation is around 41% — but if they're factoring in the personal use overlap (the basement unit being yours for part of the year), the allowable depreciation percentage gets reduced further. 25% in the ballpark isn't surprising for your situation.

    A couple things worth clarifying with your CPA:

    1. Is the 25% applying only to the renovation cost you put into the basement unit, or to the entire property? For a house hack, the cost seg and depreciation should really only apply to the portion of the property that was the rental unit — the basement square footage as a % of total, applied against the improvement basis.

    2. The furnishings and appliances you put specifically into the STR portion — those are separate. If those were purchased and placed in service for the rental, they qualify for bonus depreciation on the full amount regardless of personal use of the main unit upstairs, as long as they were 100% used for the rental.

    Aaron's point about waiting for 2026 is reasonable if you plan to dedicate the full unit to STR for the full year — that would give you a much cleaner setup and a more straightforward cost seg basis.

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  • Fulton Abraham Sanchez
    CPA| New Clients Welcome| 50 States · Member since 2016 · 435 posts · 93 votes
    6mo

    @Caleb Shupe, hi. This situation is common when part of a primary residence is converted to a short-term rental. Because the home was primarily used as a personal residence and only a portion was rented, depreciation and bonus deductions generally must be allocated based on therental portion and the time it was placed in service. 

    Even if a cost segregation study identifies assets eligible for bonus depreciation, the deduction is typically limited to that rental percentage. That’s why the deduction may appear smaller than the full 100% often discussed in podcasts or forums. The cost segregation can still be useful because those accelerated components may continue producing deductions in future years as rental use continues.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    5mo

    Hey Caleb! Little late to this one. When a property is used as both a personal residence and a short-term rental, the IRS does not treat it as 100% business use simply because it was rented for part of the year. Instead, it must be allocated between personal use and rental use.

    In your situation, since it was your primary residence and only rented as an STR during the summer, you generally run into the "vacation home" rules (commonly the 14-day / 10% test). If personal use exceeds these thresholds, then only the rental portion of expenses and depreciation is deductible. Cost segregation and bonus depreciation can still be applied, but only to the percentage of the property allocated to rental use. The remaining portion is treated as personal use and is not eligible for depreciation deductions.

    More importantly, under the vacation home rules, any deductions related to the rental activity are typically limited to rental income. In other words, you can generally reduce rental income down to $0, but you cannot use a rental loss from the property to offset other types of income. Hope this helps! If your CPA offers tax planning, you might want to get that package. If not, you might want to engage with someone who offers that and specializes in real estate. It will cost you more in the long run if you don't. Happy to connect!

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  • Jason MalabuteBusiness Member
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 901 votes
    5mo

    What your CPA is telling you lines up with how these situations usually get treated. Since the home was your primary residence for most of the year and only rented as a short-term rental over the summer, it ends up falling under the vacation home rules, which kick in once personal use goes past the 14-day / 10% threshold. At that point, only the rental-use portion of expenses and depreciation is deductible, and the rest is treated as personal use with no deduction allowed.

    Cost seg and bonus depreciation are still on the table, but they only apply to the share of the property that was actually rented, which is why the number you're looking at is much smaller than a full bonus depreciation write-off. One more thing worth knowing: under these same vacation home rules, deductions tied to the rental activity are typically capped at the rental income itself, so you can zero out the rental income but generally can't use a loss from the property to offset other income.

    Every situation is a little different depending on the specific facts, so it's worth going through the numbers with your own CPA to make sure everything is being applied correctly for your property.

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