Buy a property with average guest stays of 7 days or less, materially participate in operating it, and run a cost-seg study in year one. Under the 2025 law's restored 100% bonus depreciation, the resulting paper losses can offset non-passive income — including W-2 wages. On a $600k property, that often translates to ~$50k in year-one tax savings.
What the One Big Beautiful Bill Act actually changed
The One Big Beautiful Bill Act (OBBBA), signed in 2025 and sometimes called the Working Families Tax Cut Act, did several things relevant to real estate investors. The headline change for STR investors:
100% bonus depreciation is permanently restored for qualified property acquired and placed in service on or after January 19, 2025. Under the prior TCJA schedule, bonus depreciation had phased down to 60% in 2024, 40% in 2025, and was scheduled to reach 0% in 2027. The OBBBA reverses that — reverting to the full 100% first-year deduction.
Bonus depreciation applies to property with a recovery period of 20 years or less. That excludes the building shell itself (residential real estate is on a 27.5-year schedule; nonresidential including most STRs is on a 39-year schedule), but it includes the 5-, 7-, and 15-year asset classes that a cost segregation study can carve out from the building's depreciable basis.
The "STR loophole" — why short-term rentals are different
Under IRC §469, rental activities are generally treated as passive. Passive losses can only offset passive income — they can't reduce W-2 wages, business income, or investment gains. That's the rule that makes most rental property tax shelters ineffective for high earners.
But IRS Reg §1.469-1T(e)(3)(ii)(A) provides an exception: a rental activity is not classified as rental if the average period of customer use is seven days or less. Such activities are treated as a trade or business — not as passive rental.
Combined with the material-participation rules of §469(h), this means a qualifying short-term rental can produce non-passive losses — losses that DO offset W-2 income, business income, and other active sources.
The three pieces that have to line up
The strategy isn't hard to understand, but it requires all three pieces to be true. Missing any one of them collapses the W-2 offset benefit.
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Average stay ≤ 7 days
Per IRS Reg §1.469-1T(e)(3)(ii)(A), STRs with an average guest stay of seven days or less are treated as an active trade or business, not as a rental activity. Track guest stays and document the average annually.
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Material participation
You handle a meaningful slice of the operations. Common tests: 100+ hours and more than anyone else (often the easiest to clear), 500+ hours total, or "substantially all the work." Track contemporaneously — bookings, comms, maintenance, financials, vendor coordination.
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Cost seg + bonus depreciation
A cost segregation engineering study identifies 25–30% of the property's depreciable basis as 5/7/15-year property rather than 39-year. Under restored 100% bonus, that accelerated bucket is fully deductible in year one.
What the math can look like
$600,000 single-family STR, Tampa
Property purchased and placed in service in 2025, qualifying under both the 7-day rule and material participation. A cost segregation study performed in year one. Numbers illustrative only — your actual outcome depends on your CPA's analysis, your tax bracket, your property's component mix, and dozens of other factors.
That ~$53,000 is real. It comes off your tax bill in the year you place the property in service. For a high-W2 earner in a high-bonus year, the math frequently means the property's out-of-pocket year-one cost is meaningfully reduced once the tax savings are factored in.
What else the Bill brought back or expanded
Bonus depreciation gets the headline, but the OBBBA touches several other provisions relevant to real estate investors:
- Section 179 expensing. Furniture and appliances for the rental can be fully deducted in the year purchased, rather than depreciated. The cap was raised under OBBBA.
- QBI deduction (§199A). The 20% qualified business income deduction was preserved through 2030. STRs that qualify as a trade or business — which most properly structured ones do — are eligible.
- SALT cap relief. The state-and-local-tax deduction cap was raised, relevant if you're investing in Florida from a high-tax state.
- Estate tax exemption preserved at the elevated TCJA level — meaningful for multi-property portfolios you intend to pass to heirs.
The catches that bury people
Personal use disqualifies the strategy
Under §280A vacation home rules, personal use of the property exceeding 14 days or 10% of rental days (whichever is greater) reclassifies it from "trade or business" to "personal residence" — and the W-2 offset disappears. If you want a Florida getaway you can also rent, this strategy needs careful structuring before purchase, not after.
Hours have to be tracked contemporaneously
The IRS doesn't accept reconstructed time logs. If you're audited, your defense is a contemporaneous log — bookings handled on this date, this many hours; guest issue resolved on that date, this many hours. Reconstructing a year of activity from memory and credit card statements after the audit notice arrives almost never holds up.
State conformity varies
Florida happens to have no state personal income tax — which makes the federal strategy uncomplicated for Florida residents. But for out-of-state investors, your home state may not conform to federal bonus depreciation rules. California famously doesn't. Your CPA needs to model your specific state.
Recapture on sale
The accelerated depreciation isn't free money — it's front-loaded. When you sell, the depreciation gets recaptured. Section 1245 property (the 5/7/15-year cost-seg buckets) recaptures as ordinary income at up to 37%. Section 1250 property (the building shell) recaptures at the special 25% rate. The strategy is best understood as capital acceleration, not permanent tax elimination — most beneficial when you can hold the property 5+ years to let the time value of the deduction compound.
IRS audit risk
Large bonus-depreciation deductions paired with the material-participation loophole are on the IRS's radar. They aren't aggressive in a "make it up" sense — the rules are real — but the IRS does scrutinize. Documentation needs to be defensible, the cost seg study needs to be done by a qualified engineer, and your CPA needs to be someone who works on these strategies regularly, not someone learning as they go.
This is informational, not tax advice. Tax laws change. The OBBBA itself could be modified or partially repealed in future legislation. Your specific facts — income level, state of residence, other rental properties, family situation — change which provisions apply and how. Before relying on any of the math above, talk to a CPA who specifically does STR cost segregation work.
Why Tampa Bay is well-suited to this strategy
Two things matter for the OBBBA strategy on top of the federal tax mechanics: the property has to be in a jurisdiction where it can legally operate as a 7-day-stay STR, and the market has to support enough demand that you're materially participating in real bookings rather than running a money pit.
Hillsborough County (Tampa, Town 'n' Country, unincorporated areas) is broadly STR-friendly with a 7-day operating zone in unincorporated areas. Pasco (Wesley Chapel, Land O'Lakes, New Port Richey) requires a Conditional Use Permit but is permissive once granted. Even within Pinellas — generally the tightest of the three — markets like Indian Rocks Beach and Largo remain active. Combined with year-round tourism demand from beaches, conventions, and sports, the region produces both legal STR access and the booking volume the strategy requires.
The MLS browser on this site filters every active listing for STR viability. If you're evaluating a property specifically for the OBBBA strategy, the listings page is the right next step — and the eligibility guide explains the jurisdiction-by-jurisdiction picture.
Questions to ask before you buy
- Is the property actually 7-day-stay eligible? Zoning, HOA covenants, and city ordinances can override what the county technically allows.
- Will you qualify for material participation? If you're using a property manager handling everything, you may not.
- What's your marginal federal bracket? The strategy is most powerful at 32%+. At 22%, the math still works but the numbers shrink.
- What's your state's conformity? Florida doesn't matter (no state income tax), but if your W-2 wages are in CA, MA, NY, or NJ, your CPA needs to model the non-conformity gap.
- How long will you hold? Recapture on early sale erodes the benefit; 5+ years lets the time-value compound.
What I can help with
As your buyer's agent, I can identify properties that pass the regulatory filter for the strategy — STR-friendly zoning, no hostile HOA covenants, appropriate purchase price and basis-to-land ratio for the cost-seg math to work.
I work alongside CPAs and cost-segregation engineers regularly and can refer you to specialists. I'm a Realtor, not a tax professional — the legal and tax structuring is theirs to handle. But the property selection, the licensing due diligence, and the negotiation are mine.
See properties that fit the strategy
The MLS browser filters Tampa Bay listings for STR viability. The eligibility guide explains the licensing picture. Together they tell you what to look at next.