Guide

What is cost segregation for short-term rentals?

Cost segregation splits the cost of a rental house into groups that depreciate over different periods. For a typical single-family rental, that means separating land, 5-year personal property, 15-year land improvements and the 27.5-year building.

Why it matters

Without a study, most of a residential rental's depreciable basis is usually depreciated over 27.5 years. A cost segregation analysis identifies the pieces that belong in shorter classes, which can move depreciation earlier. How much that helps depends on your house, your income and your tax situation, which is why your CPA makes the final call.

What typically moves to shorter lives

Class	Examples on a single-family rental
5-year personal property	Appliances, certain cabinets and counters, finish flooring, ceiling fans, light fixtures, window treatments, built-ins
15-year land improvements	Driveway or parking pad, sidewalks, patio or detached deck, fence, retaining walls, in-ground pool and pool deck
27.5-year building	The structure itself: framing, roof, walls, core systems
Land	Not depreciable. Our files default to 20% unless records show a better assessor or appraisal split.

Classification of any specific item is a position for your CPA to review.

Real examples, different results

In the four studies we've issued and published, the short-life share of depreciable basis ranged from 18.1% to 28.6%. A 660 sf two-bed ranch moved $14,000 into 5- and 15-year property (18.1%). A roughly 3,400 sf five-bed pool home moved $52,226 (26.5%). Pools, site work and finishes drive the difference. These are examples, not predictions for your property. See all examples.

Bonus depreciation

Qualifying 5-year and 15-year property acquired after January 19, 2025 may be eligible for 100% additional first-year (bonus) depreciation. Whether and how it applies to you is your CPA's decision. If the house was placed in service in an earlier year, your CPA decides whether a change in accounting method (Form 3115) applies.

Short-term rentals specifically

Airbnb and Vrbo houses are often furnished and finished, so they can have more 5-year property than an empty long-term rental. Whether accelerated depreciation can offset other income depends on passive-activity, material-participation and other taxpayer-specific rules. Ask your CPA.

When cost segregation may not fit

• There's little income for the deduction to offset.
• Land is most of the purchase price.
• The house has very few short-life components.
• Your CPA won't use a remote, photo-and-records report.

How a remote study works

Instead of an on-site inspection, a remote study uses your property records and a structured set of photos. That keeps the price flat for a typical single-family rental. Elite's report starts at $495 and is built for CPA review. It is not a PE-stamped engineering study and not audit defense.

General information, not tax, legal or accounting advice. Your CPA decides tax treatment.