Residential rental · 27.5-year property
Cost Segregation for Short-Term Rentals
Short-term rentals are the one residential category where the tax rules and the physical property both work in the owner's favour — but only if you understand what the seven-day test actually requires.
Why the reclassification percentage runs high
A short-term rental is furnished, equipped and finished far beyond a long-term rental. Furniture, linens, kitchenware, televisions and electronics, smart locks and noise monitors, hot tubs, game rooms, outdoor kitchens, fire pits, pools and decks are all short-life property. The exterior amenity spend alone often exceeds what a comparable long-term rental carries.
The seven-day rule, stated carefully
Under the regulations, an activity is not a rental activity if the average period of customer use is seven days or less. That takes it outside the automatic passive classification that applies to rentals — but it does not by itself make the activity non-passive. You still have to materially participate under one of the standard tests. Owners who self-manage, handle bookings, coordinate cleaning and maintenance and keep contemporaneous time records are the ones who succeed here. Those who hand everything to a full-service property manager generally do not.
Component takeoff
What we pull out of short-term rentals
Grouped by the recovery period each component lands on. This is representative, not exhaustive — the takeoff on your building will be longer.
- 5Furniture, mattresses, televisions and electronics
- 5Kitchen appliances, cookware and small appliances
- 5Cabinetry, vanities and countertops
- 5Carpet, luxury vinyl plank and area rugs
- 5Decorative lighting, ceiling fans and window treatments
- 5Smart locks, thermostats, cameras and noise monitors
- 5Hot tubs, saunas, game tables and entertainment equipment
- 5Pool and spa equipment, pumps, heaters and controls
- 7Outdoor furniture and recreational equipment
- 7Owner-retained tools and maintenance equipment
- 15Pool, spa shell, decking, coping and hardscape
- 15Outdoor kitchens, fire pits, pergolas and shade structures
- 15Driveway, parking pad, walkways and patios
- 15Fencing, gates, retaining walls and privacy screening
- 15Landscaping, irrigation, lighting and water features
- 15Docks, boat lifts and shoreline improvements where applicable
- 15Site drainage and grading improvements
- 27.5Structure, foundation, framing, roof and envelope
- 27.5HVAC, plumbing and electrical serving the property generally
- 27.5Windows, doors and permanent built-ins
Questions
How much of the basis usually reclassifies on this property type?
Studies on short-term rentals typically move 20% to 32% of depreciable basis into 5, 7 and 15-year classes. That is a planning range from comparable buildings, not a promise — the number that ends up on your return comes from the actual takeoff.
What documents do you need?
The closing statement, the current depreciation schedule and the property address at minimum. Construction records, drawings, pay applications and change orders make the work more precise and often cheaper.
I bought this several years ago. Is it too late?
No. As long as you still own it and placed it in service after 1986, a look-back study captures every missed deduction and brings it forward on the current return via Form 3115. No amended returns.
The study is one piece. We can handle the rest of the return.
Deprecio is part of the Shurek Accounting & Tax family of brands. If you want the study and the tax work under one roof — the return, the Form 3115, entity structure, quarterly estimates, multi-state filings — that is a single engagement, not a hand-off between two firms.
No-cost feasibility review
Find out what your building is hiding.
A feasibility review is free and takes about twenty minutes. Bring the closing statement and the depreciation schedule; we will tell you plainly whether a study pays for itself.