🏛️ House Approves “One Big Beautiful Bill” — What it Means for STR Investors
On July 3, 2025, the U.S. House passed the “One Big Beautiful Bill Act” (OBBBA), sending it to the President’s desk. It carries sweeping changes across tax policy—most notably for property owners and real estate investors .
🔹 100% Bonus Depreciation is Back (And Bold)
The bill restores 100% bonus depreciation for qualifying assets placed in service after January 19, 2025, reversing the planned phase‑down . For STR owners, this means:
Accelerated write-offs: Furnishings, appliances, and eligible structural improvements (like HVAC systems or cabinetry) can be fully expensed in the first year.
Improved cash flow: This deferral of taxable income boosts liquidity in early years—critical for short‑lived rental assets.
🔹 STR Loophole Meets Supercharged Depreciation
STRs—defined by quick turnovers (typically stays under 7 days) and owner management—are treated more like active businesses. This classification allows depreciation losses, including those triggered by bonus depreciation, to offset active income such as W‑2 earnings . In practice:
You can recoup substantial deductions fast.
If you actively manage your STR and meet the IRS material participation criteria (e.g. 100+ hours per year), even large bonus depreciation shifts can reduce your taxable income.
🔹 Cost Segregation + 100% Bonus = Tax Planning Power
Pairing cost segregation with 100% bonus depreciation can supercharge STR benefits:
Cost Segregation Study: Reclassify building components (appliances, land improvements, AC, etc.) into 5-, 7-, or 15-year assets.
Bonus Depreciation: Immediately write off those reclassified components in year one.
Active status: If material participation is met, deductions aren’t limited by passive loss rules.
The result? Significant upfront tax savings—as affirmed by KBKG case studies showing $87k–$234k of deductions in year one from STR cost segregation .
🔹 What’s Changed (and What Still Works)
IRA clean‑energy incentives scaled back, but STRs primarily benefit from depreciation rules—so direct impact is limited .
Section 174 R&D expensing and SALT cap relief may affect investors in mixed-use properties—but STRs lean heavily on depreciation strategies .
đź’ˇ Strategic Takeaways for STR Investors
Strategy
Action
Material Participation
Log 100+ hours or perform more management tasks than any hired help. Keep records.
Cost Segregation
Commission or self-generate a study to reclassify assets. Ideal for maximizing bonus depreciation.
One-Year Windfall
Take advantage of 100% bonus depreciation to create large current-year deductions.
Plan Ahead
The full bonus applies only to assets placed in service before January 1, 2030. Act quickly.
đź“Ś Your Next Moves
Track participation – Keep a log of your STR activities to meet IRS tests.
Schedule a cost-seg study – Use a Certified Cost Segregation Professional or a quality DIY tool. KBKG’s Residential Cost Segregator® is one example .
Sync with your tax advisor – Ensure your strategy aligns with broader income positioning.
Monitor final bill text – This is House approval. Senate changes may tweak effective dates or add limitations.
âś… Final Summary
The OBBBA reinstates 100% bonus depreciation, allowing STR investors to accelerate deductions on furniture, equipment, and improvements. When paired with an STR’s classification as active business income, and a cost segregation study, this becomes a powerful tax optimization tool—compressing years of benefits into a single tax year.
As long as you’re actively managing your STR and capitalize on cost segregation before 2030, you stand to significantly offset income, improve cash flow, and reduce tax burden in the short term.