Trump's 100% Bonus Depreciation for Airbnb: Tax Strategies to Maximize Savings

Trump’s proposed restoration of 100% bonus depreciation represents a game-changing opportunity for Airbnb hosts to supercharge their tax savings. This policy, which would be retroactive to January 20, 2025, allows immediate deduction of qualifying assets rather than spreading depreciation over the years.

As of the time of writing, it has already passed the House and is moving on to the Senate, where it will likely be scrutinized and revised. However, as each day passes, the potential approval of the bill is starting to become more and more likely, so it's optimal for hosts to plan ahead.

When strategically combined with other advanced tax techniques, hosts can create fantastic first-year deductions that transform their entire investment approach. Turn those expenses into tax write-offs by combining them with other strategies. Here’s how you can do that.

Combining Other Tax-Saving Strategies With 100% Bonus Tax Depreciation for Airbnb Hosts

The most savvy Airbnb hosts leverage multiple tax strategies simultaneously to maximize their returns. Using cost segregation studies, the Airbnb tax loophole, and establishing material participation STR status, are already great tax-saving strategies in their own right. However, you can also leverage these strategies in combination with 100% bonus depreciation. This often results in substantial first-year deductions that can offset both rental and non-rental income, dramatically improving cash flow and accelerating the path to building a profitable short-term rental portfolio.

The Airbnb Tax Loophole and Material Participation

The STR Tax Loophole is a tax-saving strategy that allows Airbnb hosts to potentially slash their tax bills by changing their rental income from passive to active. This reclassification largely depends on meeting two distinct criteria. These are:

1. Short-Term Stay Requirement: The average stay of your guests throughout the tax year must be 7 days or fewer (considering only actual rented days).
2. Material Participation: You must materially participate in the rental activity, functioning more as a business owner than a passive investor.

To meet the Material Participation requirement, the IRS has set seven different criteria to determine material participation. You only need to satisfy one of them to meet the requirement, most Airbnb hosts typically qualify for 1-3. The criteria are as follows:

• Spend more than 500 hours on the short-term rental business.
• Do substantially everything for the STR business.
• Commit over 100 hours, and no one else spends more time than you.
• Participate significantly for more than 100 hours, with combined activities exceeding 500 hours.
• Engage in the business for five of the prior ten taxable years.
• Provide non-income producing personal services for three of the past taxable years.
• Show regular and continuous participation exceeding 100 hours.

Once you meet both requirements, you can use deductions and depreciation from your STR property to reduce your personal taxable income because your property is considered active income and not passive investment.

What makes this strategy so valuable is that once your short-term rental qualifies as an active business rather than a passive investment, you can use rental losses to offset your W-2 or self-employment income. This is particularly beneficial for high-income earners who would otherwise be unable to deduct these losses against their regular income.

The real magic happens when you combine this active business classification with the proposed 100% bonus depreciation. Hosts can immediately deduct the full cost of qualifying assets like furniture, appliances, electronics, and qualified improvement property in the year of purchase instead of depreciating them over many years.

Deductible expenses include everything from maintenance and repairs to utilities, platform fees, cleaning supplies, guest amenities, and even travel related to the property. By leveraging these deductions, hosts can generate significant “paper losses” while maintaining positive cash flow, creating a powerful tax shield for their other income sources.

For a more detailed breakdown of how to implement this strategy and calculate your potential tax savings, check out our own STR Tax loophole guide!

Combining Cost Segregation Strategies with 100% Bonus Depreciation Policy

Cost segregation represents one of the most powerful Airbnb depreciation strategies available to short-term rental investors, particularly when combined with 100% bonus depreciation. This advanced short-term rental tax strategy allows property owners to reclassify components of their rental property from real property (usually depreciated over multiple decades) into personal property categories with much shorter recovery periods.

Through a professional cost segregation study, hosts can identify numerous components that qualify for accelerated depreciation, including:

1. Furniture and fixtures (5-year property)
2. Appliances and electronics (5-year property)
3. Carpeting and flooring (5-year property)
4. Window treatments (5-year property)
5. Landscaping and outdoor features (15-year property)
6. Specialized electrical systems (5-7 year property)

A professional cost segregation study typically identifies 20-40% of a property’s cost that can be reclassified into these shorter-lived assets. When paired with the currently proposed 100% bonus depreciation, the tax impact becomes substantial.

Consider this example: You purchase a $500,000 Airbnb property, and through cost segregation, 30% ($150,000) gets reclassified as a 5, 7, or 15-year property. With 100% bonus depreciation, you could deduct the entire $150,000 in year one rather than spreading it over decades. For a host in the 32% tax bracket, this translates to approximately $48,000 in first-year tax savings.

While DIY approaches exist, professional cost segregation studies provide stronger documentation to support your deductions if audited. While the costs of a proper study usually hover around $2,500 to $5,000, these can be well worth the investment since they often pay for themselves many times over through the accelerated depreciation benefits you get.

Wrapping Things Up

If passed, the comeback of the 100% bonus depreciation policy will result in huge savings for Airbnb hosts and short-term rental investors looking to expand their portfolio or renovate their current rentals.

When executed properly, hosts can achieve crazy deductions, enjoying the benefits of what would otherwise be large expenses. Remember to consult qualified tax professionals to ensure compliance and maximize your specific situation’s potential benefits.

Disclaimer: This article provides general information about the proposed 100% bonus depreciation policy and potential strategies to combine with it. It should not be construed as tax, legal, or financial advice. Tax policies are subject to change, implementation details may vary, and retroactive application is not guaranteed. Consult with a qualified tax professional regarding your specific situation before making any business or investment decisions based on proposed legislation. We assume no liability for actions taken based on this content.