A $52,000 refund from one Airbnb and a cost segregation study

A client we will call Sean was new to Airbnb. In 2021 he bought a four-bedroom, three-bath single-family home on the water, with a pool, specifically to run as a short-term rental, because he had heard about the strategy at one of our sessions: keep the average guest stay at seven days or less and materially participate in running it. His salary put him in the 32% bracket, and his previous preparer treated rental depreciation as a passive item that could never touch it.

We confirmed the two tests the short-term rental exception turns on, the average stay and his own hours managing the property, and then commissioned a cost segregation study on the house. Most people assume cost segregation is for commercial and apartment buildings; it works on a single-family home when the numbers justify it. The study broke the property into 5-year and 15-year components: the deck and patio, the landscaping, and the pool, roughly $50,000 on its own, which is a land improvement eligible for bonus depreciation rather than a 27.5-year asset.

The study identified $164,000 of first-year depreciation, $158,000 of it as bonus depreciation across the 5- and 15-year property. Because the exception makes those losses non-passive, they offset his salary at 32%, and the return produced a $52,000 refund he did not know existed. He now keeps a contemporaneous hours log so the treatment holds in future years, and the next property is being evaluated against the same rules.