A short-term rental and a long-term rental can be the same house and will not produce the same study. The STR is furnished, and it usually has a deck, a hot tub, and a graded driveway. Every one of those things depreciates over 5 or 15 years instead of 27.5, which is why cost segregation on an Airbnb reclassifies at the top of the standard band while the identical house rented to an annual tenant lands near the bottom of it.
Key takeaways
- Furnished rentals carry real 5-year personal property a long-term rental does not: furniture, appliances, electronics, window treatments, decorative lighting, removable flooring, outdoor furniture.
- Vacation properties carry heavy 15-year land improvements: driveways, decks, pools, fencing, landscaping, site lighting, fire pits.
- Combined reclassification on a well-appointed STR commonly lands at or modestly above the top of the standard 20% to 30% band. Individual amenity-heavy properties can run higher, but that is a property-specific finding, not a rule of thumb.
- Furnishings you buy after closing are separate asset additions, not part of the building basis. They get their own placed-in-service date and their own 100% bonus deduction.
- The deduction is only usable if the §469 short-term rental exception and material participation both hold. Confirm that first; the engineering is the easy part.
Why a Furnished Rental Reclassifies More Than a Long-Term One
A long-term single-family rental is a shell. The tenant often brings the couch, the TV, and the blinds, and the basis is overwhelmingly structure. Reclassification on a plain single-family rental is modest for that reason.
An STR is an operating hospitality asset. You furnished it because guests will not book an empty house, and every item you installed is tangible personal property under §1245: five-year life, 200% declining balance, eligible for 100% bonus depreciation under §168(k), which OBBBA made permanent for property acquired and placed in service after January 19, 2025.
The site tells the same story. Mountain and beach rentals sit on graded lots with long driveways, retaining walls, decks, and outdoor living space, because that is what the listing photos sell. Those are 15-year land improvements. Neither category is exotic; they are categories a generic depreciation schedule never separated, because the closing statement showed one number for "building."
The Room-by-Room Walk
What an engineer catalogs inside a typical mountain or beach STR:
Kitchen. Appliances, cabinetry and millwork, decorative and under-cabinet lighting, and dedicated circuits serving specific equipment are 5-year. The sink, supply and waste lines, and branch wiring remain structure.
Living and great room. Furniture, area rugs and removable flooring, televisions and mounts, sound systems, decorative fixtures, and window treatments are mostly 5-year.
Bedrooms. Beds, case goods, lamps, blackout shades, televisions, and carpet or removable luxury vinyl plank. All 5-year.
Bathrooms. Mostly structure. Tile, tubs, shower enclosures, toilets, and vanity plumbing are building components; freestanding vanities, mirrors, and decorative lighting are the exceptions.
Systems and technology. Smart locks, cameras, WiFi equipment, thermostats, noise monitors, and their low-voltage cabling are 5-year security and communication equipment. Whole-house HVAC is structure.
The Site Walk
Outside the door is where STRs pull ahead of nearly every other residential asset.
| Site asset | Life |
|---|---|
| Driveway, parking pad, walkways, pavers | 15-year land improvement |
| Decks, patios, and stairs detached from the structure | 15-year land improvement |
| Pool, spa shell, pool equipment, and dedicated utilities | 15-year land improvement |
| Hot tub (freestanding, plug-in or dedicated circuit) | 5-year personal property |
| Landscaping and hardscape adjacent to the building | 15-year land improvement |
| Fencing, gates, retaining walls, drainage | 15-year land improvement |
| Site lighting, path lighting, and its underground feed | 15-year land improvement |
| Fire pit, outdoor kitchen, grill | 5-year or 15-year depending on permanence |
| Outdoor furniture, umbrellas, games, bikes, kayaks | 5-year personal property |
Permanence on outdoor items turns on the classic six-factor analysis: can it be moved, was it designed to stay, how much damage does removal cause. A poured-in-place masonry outdoor kitchen and a rolling stainless grill get different answers. Our catalog of 5-, 7-, and 15-year property walks the test.
A Worked Example: A $780,000 Mountain Cabin
Example: a $780,000 four-bedroom cabin, placed in service in March Purchase price $780,000. Land allocated at $180,000, leaving $600,000 of depreciable basis. The owner then spent $65,000 furnishing the property before the first guest arrived.
| Asset class | Basis | First-year deduction |
|---|---|---|
| 5-year personal property (in building basis) | $108,000 | $108,000 |
| 15-year land improvements | $60,000 | $60,000 |
| 27.5-year structure | $432,000 | $12,436 |
| Furnishings purchased after closing (5-year) | $65,000 | $65,000 |
| Total depreciable basis | $665,000 | $245,436 |
Reclassified basis inside the purchase is $168,000, or 28% of the $600,000 building basis, which is where a furnished, amenity-heavy vacation property tends to land. The March placed-in-service date puts the structure on a 2.879% first-year rate under the mid-month convention, not a full year.
Now the honest version of the benefit. Without a study, the same year still produces $17,273 on the building plus the $65,000 of furnishings, or $82,273. The incremental deduction the study creates is therefore $163,164, not $245,436, because the reclassified dollars were producing 27.5-year depreciation anyway. At a combined 35% marginal rate that is roughly $57,100 of tax deferred in year one, against a study fee that for single-family and small residential work typically runs $2,500 to $6,500. Whether the cabin owner keeps any of it turns on the material participation log, not the engineering.
Furnishings Bought After Closing Are Their Own Assets
This is the point most owners get wrong, and it costs them.
The purchase price buys the building and whatever personal property conveyed with it. Everything you buy afterward, the mattresses, the sectional, the smart TVs, the patio set, the kayaks, is a separate asset addition with its own invoice and placed-in-service date. It does not have to be teased out of an allocation; it is already itemized on your statement.
Keep a furnishing schedule from day one: item, cost, date placed in service. Note the arithmetic: a property bought for $780,000 with $65,000 of furnishings has $665,000 of depreciable basis, not $600,000. Owners who never separated the furnishings are depreciating them over 27.5 years or, worse, not at all.
Three Things That Can Zero Out the Benefit
You may not be able to use the loss. A study creates a deduction; §469 decides whether you can use it. The STR exception requires an average period of customer use of seven days or less, and you must materially participate. Read the short-term rental strategy and the time log requirements first. If the position fails, the loss suspends.
§280A personal use. Use the property yourself for more than the greater of 14 days or 10% of rental days and your deductions get limited and allocated. A family cabin you also rent is a different tax animal from a rental you occasionally inspect.
The property may be too small. The go/no-go threshold is roughly $500,000 of depreciable basis, excluding land, though a furnished STR with heavy site work sometimes clears it lower. Our piece on the minimum property value works the arithmetic.
Buying an STR for the Deduction Is a Bad Reason to Buy an STR
The deduction is a timing benefit. It accelerates depreciation you were going to take anyway, and it returns as recapture on sale unless you exchange or hold until a step-up. It does not make a bad property good.
A cabin in a saturated submarket at 38% occupancy, with a homeowners association quietly drafting a short-term rental ban, is a bad investment with a large first-year deduction. The deduction lasts one year; the mortgage lasts thirty. Buy on the operating economics, then run the study.
Frequently Asked Questions
Does cost segregation work on a single Airbnb?
Yes, provided the depreciable basis justifies the fee. A furnished vacation rental with substantial site work can justify a study at a lower basis than a comparable long-term rental, because the reclassification percentage is higher. Under roughly $500,000 of basis, run the arithmetic first.
Can I do a study on an Airbnb I bought three years ago?
Yes. A look-back study catches up the missed depreciation through a Form 3115 method change, with the cumulative §481(a) adjustment taken in full in the year of change. No amended returns, and the bonus percentage is set by the original placed-in-service date.
What if I furnish the property over two tax years?
Each item is placed in service when it is ready and available for use, so the deduction follows the calendar. Furniture delivered in December of year one and a game room outfitted in March of year two are deducted in year one and year two respectively.
Find Out in 24 Hours Whether a Study Pays for Itself
Not every property justifies a study, and we will tell you when yours doesn't. Send Precision Cost Segregation the address, purchase price, closing date, and your rough tax rate, and we will come back with a modeled reclassification range and an estimated first-year benefit at no cost.
This article is provided by Precision Cost Segregation for general educational purposes and does not constitute tax, legal, or accounting advice. Tax outcomes depend on your specific facts, your tax rate, your passive activity position, and your entity structure. Figures shown are illustrative. Consult your CPA or tax advisor before acting, and engage a qualified professional to perform any cost segregation study. Information is current as of publication.
This article is general information, not tax or legal advice. Depreciation outcomes depend on your facts, elections, and current law — consult your CPA before acting. © 2026 Precision Cost Segregation.