STR Tax Deductions: The Complete Guide for Short-Term Rental Owners
Short-term rental ownership comes with an unusually favorable tax treatment — but only if you know which deductions to claim and how to structure them correctly. This guide covers every major deduction category available to STR owners, ranked roughly by typical dollar impact.
1. Depreciation (Including Cost Segregation)
Depreciation is almost always the largest deduction available to rental property owners. Under straight-line depreciation, a $500K improvement basis generates about $18,000/year over 27.5 years. With cost segregation and bonus depreciation, you can front-load $80K–$150K into year one — a 4–8× acceleration.
Cost segregation front-loads deductions into early years when they're most valuable (tax rates, time value of money). Straight-line spreads them evenly. The total depreciation is the same over the full life — but the time value difference can be worth $30K–$80K in present value for a typical STR.
2. Operating Expenses
| Expense Category | Deductible? | Notes |
|---|---|---|
| Mortgage interest | Yes | Report on Schedule E |
| Property taxes | Yes | Report on Schedule E |
| Insurance premiums | Yes | STR-specific policy or allocation |
| Platform fees (Airbnb/VRBO) | Yes | Service fees paid to platform |
| Cleaning fees (host-paid) | Yes | Professional cleaning costs |
| Utilities | Yes | If owner-paid; prorate if personal use |
| Repairs & maintenance | Yes | Must be repairs, not improvements |
| Property management fees | Yes | If using a PM company |
| Advertising/marketing | Yes | Photography, listing fees |
| Supplies (toiletries, linens) | Yes | Guest-consumable supplies |
| Professional services (CPA) | Yes | Tax prep, legal, accounting |
| HOA dues | Yes | If applicable |
| Travel for property visits | Yes (partial) | Ordinary and necessary rule applies |
3. Furnishing and Equipment Deductions
Every piece of furniture, appliance, mattress, TV, kitchen equipment, and décor item you purchase for your STR is deductible. For most STR owners, furnishing costs run $15K–$50K at initial setup. Under bonus depreciation, you can deduct 100% of this in year one. These furnishing costs are typically separate from your cost segregation study — they're direct business expenses regardless of whether you do a study.
4. Personal Use Days and Expense Allocation
If you personally use your STR (family vacations, owner stays), you must allocate expenses between rental and personal use. The IRS method allocates by total days (rental days ÷ total days used). The Tax Court method uses only rental days as the denominator — usually producing larger deductions but requiring consistent application. A property with zero personal use days is fully deductible with no allocation required.
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