bonus depreciation on MTRs

[Bob V.]

Does bonus depreciation only apply to short-term rentals, or can you also take advantage of it with medium-term rentals?

[Ricardo R.]

Bob — good question, because a lot of people mix up STR rules with MTRs when it comes to depreciation. Here's the breakdown as it applies to your situation:

1. Bonus depreciation basics

• Bonus depreciation applies to any rental property when you do a cost segregation study.
• It lets you front-load the depreciation on items with shorter useful lives (appliances, flooring, fixtures, etc.) instead of spreading them out over decades.
• The key isn’t whether it’s short-, medium-, or long-term — it’s whether the property qualifies as a rental for tax purposes.

2. Where STRs differ (and why people talk about them more)

• Short-term rentals sometimes qualify as an “active business” (if the average stay is under 7 days or you materially participate). That lets some investors use bonus depreciation to offset active W2 or business income, not just rental income.
• That’s the big loophole people hype up online. It’s not that STRs are the only ones eligible for bonus depreciation — it’s that they can offset a bigger slice of your income if you meet the IRS tests.

3. Medium-term rentals (MTRs, 30+ days)

• MTRs don’t usually meet the “average stay under 7 days” rule. So they’re treated the same as traditional long-term rentals for tax purposes.
• That means: yes, you can do a cost seg and claim bonus depreciation, but it’ll generally only offset passive income (your rental profits), unless you’re a real estate professional for tax purposes.

4. What this means for you in Austin

• If you’re running MTRs (say, 3–6 month stays for travel nurses or corporate housing), you absolutely can take bonus depreciation after a cost seg.
• The main limit is that the losses usually stay “passive.” They can offset other rental income and even carry forward, but they won’t wipe out your W2 paycheck unless you qualify as a RE professional.

In plain English:

• STRs: possible to use bonus depreciation against all income if you materially participate.
• MTRs/LTRs: you still get bonus depreciation, but it stays in the “rental bucket” unless you’ve got RE pro status.

If you’ve got a good CPA, they can run the numbers to see if a cost seg on your MTR makes sense this year. Sometimes the savings are huge, sometimes it’s better to spread it out depending on your tax bracket; I really hope this helps you out, I sent you a DM on BP and hope you can assist.