Bonus Depreciation in 2026 for STR Owners: The Rate Table

If you own a short-term rental (STR), the bonus depreciation rate on its 5-, 7-, and 15-year components depends first on the date you acquired it. Property acquired after January 19, 2025, gets 100%, with no end date. Property acquired on or before that date stays on the old schedule, which means 40% if it was placed in service in 2025, 20% if it is placed in service in 2026, and nothing from 2027.

The change came from Public Law 119-21, enacted July 4, 2025, which the IRS calls the One, Big, Beautiful Bill Act. Section 70301 of that law replaced the phase-down in section 168(k) of the Internal Revenue Code with a flat 100%, and its effective-date clause applies the change “to property acquired after January 19, 2025.” So the date that decides your rate is the acquisition date. The placed-in-service date only decides which year of the old schedule applies to property bought before the cutoff.

The Rate Table

These are the rates for property other than the long-production property and aircraft the statute treats separately. Each row links the text it comes from.

Property acquired before September 28, 2017, follows a separate phase-down in the old section 168(k)(8), at 50%, 40%, and 30%, and it reached 0% for property placed in service after 2019.

The Acquisition Date Is the Contract Date

Section 70301(c)(4) settles the acquisition date. It says property “shall not be treated as acquired after the date on which a written binding contract is entered into for such acquisition.” For a rental bought under a purchase contract, the date you signed the binding contract is the date that counts, and the closing date does not move it.

The IRS announced Notice 2026-11 on January 14, 2026. It tells taxpayers to test the acquisition date with the rules already in Treasury Regulation 1.168(k)-2(b)(5), substituting “January 19, 2025” for “September 27, 2017.” The notice is interim guidance, and Treasury has said proposed regulations will follow.

The mistake to check for is a contract signed in early January 2025 on a house that closed in February. The closing falls after the cutoff, but the contract does not, so the property is on the old schedule. If it was placed in service in 2025, the rate is 40%. If renovation pushed the placed-in-service date into 2026, the rate is 20%.

What Bonus Depreciation Applies To

Bonus depreciation applies only to property with a recovery period of 20 years or less, under section 168(k)(2)(A)(i)(I), a clause the 2025 law did not amend. In a rental, that is the 5-year, 7-year, and 15-year property a cost segregation study identifies, such as the appliances, flooring, and landscaping the tax loophole post lists.

The building itself is 27.5-year residential rental property or 39-year nonresidential real property under section 168(c), depending on how section 168(e)(2) classifies it. Both recovery periods are longer than 20 years, so the structure gets no bonus depreciation at any rate. Land is not depreciable. The rate applies to the basis a study moves into the 5-, 7-, and 15-year classes. You can model that share for your own property with the cost segregation calculator.

What Each Rate Does on a $400,000 Property

As an example only, take the $400,000 property from our STR tax loophole post, where a cost segregation study reclassifies roughly $83,000 into 5-, 7-, and 15-year property. The table shows the bonus depreciation on that $83,000 at each rate in the table above.

The remainder still depreciates over 5, 7, or 15 years, so a lower rate moves part of the deduction into later years. The building’s share depreciates over 27.5 or 39 years at any rate.

2 contracts on the same $400,000 house show the difference. Signed on January 19, 2025, and placed in service that year, the house carries $33,200 of bonus depreciation. Signed on January 20, 2025, it carries $83,000, unless the owner makes the 40% election described below. That is a $49,800 difference in the first-year deduction from a 1-day difference in the contract date. The deduction only offsets your W-2 income if you also pass the 7-day average stay rule and material participation, which the tax loophole post explains.

The 40% Election and the Election Out

Section 168(k)(10) lets you choose 40% instead of 100% for property acquired after January 19, 2025, and placed in service during your first tax year ending after that date. For an individual filing on the calendar year, that is the 2025 tax year. Under Notice 2026-11, you make the election by attaching a statement to the timely filed return, including extensions, for the tax year that includes January 20, 2025. For property placed in service in later tax years, the rate is 100% unless you elect out.

Section 168(k)(7) separately lets you elect out of bonus depreciation for a whole class of property in a tax year. The election out applies to every asset in that class placed in service that year, and you can revoke it only with the Treasury’s consent.

The Host Camp Take

Under current law, the 100% rate is permanent for property acquired after January 19, 2025, and only for that property. If you bought before that date and are placing the property in service in 2026, your rate is 20%, and the example above shows what that does to a study’s value. Before you pay for a study or count on a deduction, find the purchase contract and check its date against January 19, 2025, because that date sets which row of the table applies to you.

[Book a free strategy call](LINK NEEDED) and we will look at your numbers with you.

If you are financing a 2026 purchase, use the lender locator. Schedule E vs. Schedule C explains which form your rental is reported on.

For related comparisons, see what a cost segregation study costs and Airbnb tax deductions.

Host Camp is not a licensed tax, legal, or financial adviser. Confirm figures for your situation with a professional.

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