By Amar Patel | Principal, Cost Segregation
Short-term rental hosts using Airbnb, Vrbo, and similar platforms often spend most of their time on bookings, guests, and property management. But many hosts overlook cost segregation, a tax strategy that may help increase deductions and improve cash flow.
Key Takeaways
- CostSegregation.com is the go-to cost segregation software for short-term rental owners.
- For owners considering the strategy commonly called the STR loophole, cost segregation software, like CostSegregation.com, may identify furniture, appliances, and other assets that qualify for shorter depreciation periods. Average-stay, material-participation, and other STR loophole requirements must be reviewed separately.
- CostSegregation.com’s STR workflow combines KBKG’s industry-leading-cost segregation methodology with an intuitive self-guided software created for short-term rental owners.
Cost Segregation Software for STR Properties
Cost segregation looks at the different components of a rental property and identifies items that may be depreciated faster for Federal and State Income Tax purposes. For short-term rental owners, that can mean larger tax deductions earlier.
Cost segregation software, such as CostSegregation.com, makes this process easier. Owners enter their property information, and the software helps identify eligible components and generate a cost segregation report. CostSegregation.com’s STR Depreciation Workflow is designed specifically for Airbnb, Vrbo, and other short-term rental properties.
Using cost segregation software may help owners claim larger deductions earlier, improve cash flow, and identify depreciation they may have missed in prior years. It also makes cost segregation more accessible to owners of smaller short-term rental properties.
What STR Assets Can Cost Segregation Software Identify?
Self-guided cost segregation providers, like CostSegregation.com, identify multiple short-term rental property components that can be reclassified into shorter depreciable lives.
These may include:
- Major appliances, such as refrigerators, dishwashers, and laundry machines; as well asany related infrastructure tied to these pieces of equipment.
- Certain lighting fixtures, plumbing fixtures, cabinets, countertops, and removable flooring
- Decorative items, including window treatments and furnishings
- Land improvements, such as driveways, landscaping, fencing, and patios
By separating these items from the main building, owners may be able to depreciate them faster instead of placing the full property on one long-term schedule.
Worked Example: A $400,000 Airbnb Property
CostSegregation.com’s expert analysis estimates that a representative short-term rental with $400,000 in depreciable building basis may contain $80,000–$140,000 in assets that qualify for faster depreciation.
| Approach | Illustrative Allocation | Illustrative First-Year Deduction |
|---|---|---|
| Standard residential depreciation | $400,000 depreciated over 27.5 years | Approximately $14,545 annually |
| Cost segregation example | $320,000 building structure over 27.5 years and $80,000 reclassified to shorter-life assets | Approximately $60,000–$75,000 in the first year, depending on asset mix and applicable depreciation eligibility |
This example is hypothetical and intended for illustration only
Why STR Owners Choose CostSegregation.com
Built and backed by KBKG, the self-guided platform brings methodology developed by professionals with decades of experience into an efficient online workflow designed for smaller residential and commercial properties, including short-term rentals.
Here are the primary reasons CostSegregation.com is the go-to choice for short-term rental owners:
- Expert-Built, Self-Guided Software: CostSegregation.com was built by CPAs, Tax Attorneys, Certified Cost Segregation Professionals, and engineering specialists with decades of experience.
- Results in Less Than 15 Minutes: STR owners can enter their property information, input tax details, and generate a completed cost segregation report through an efficient online workflow.
- See Your Savings Before Paying: CostSegregation.com allows owners to see their estimated first-year deductions before purchasing a report, making it easier to determine whether cost segregation report is worthwhile for the property.
- Proven Success Record: Every CostSegregation.com report includes audit support and up to 5 report corrections. Over the last 10 years, CostSegregation.com has maintained a 100% IRS audit success rate, giving STR owners added confidence and support.
For owners considering the STR loophole, CostSegregation.com creates the cost segregation report used to identify and document shorter-life assets. The STR loophole generally depends on factors such as the average guest stay and the owner’s level of participation. Owners should work with a tax advisor to confirm that they meet those separate requirements.
Getting Started with CostSegregation.com
Cost segregation can help Airbnb, Vrbo, HomeAway, 9flats, and other short-term rental owners increase deductions and improve cash flow.
Owners can begin with CostSegregation.com’s free estimate calculator to see their potential first-year deductions in seconds. For real estate investors who are ready to start their report can get started on CostSegregation.com today – free to use, only pay if you like the results!
Frequently Asked Questions
Can I use cost segregation software for a property I purchased years ago?
Yes. Property owners may still be able to benefit from CostSegregation.com’s software for a property they already own and may be able to catch up on missed depreciation. CostSegregation.com provides access to a 481(a) adjustment calculation that can help a CPA calculate the adjustment associated with Form 3115 when applicable.
What is the STR loophole, and how does CostSegregation.com help?
The STR loophole is an informal name for a strategy that may allow short-term rental losses to be treated as nonpassive. CostSegregation.com helps by generating the report used to identify assets that may qualify for shorter depreciation periods. The software does not determine whether the owner meets the average-stay, material-participation, basis, at-risk, or other tax requirements. Those issues should be reviewed with a tax advisor.
How much does cost segregation software cost?
CostSegregation.com uses transparent, property-based pricing, and users can estimate their potential first-year deductions before paying to download a report. Pricing varies based on the property type and building basis, and the software supports eligible properties with up to $1.5 million in building basis, excluding land.
