What the Big Beautiful Bill Means for Short-Term Rental Owners

Key Takeaways

• The One Big Beautiful Bill Act (OBBA) restores 100% bonus depreciation through 2027, allowing STR investors to fully deduct furnishing and improvement costs in year one.
• The QBI deduction is now permanent, offering up to a 20% deduction on net rental income for those who treat their STRs as a business.
• STR investors should act now by reassessing income reporting, exploring cost segregation, and using tools like AirDNA to optimize decisions under the new tax rules.

If you're running—or planning to run—a short-term rental (STR), you just got handed a major tax advantage.

Signed into law on July 4, 2025, the One Big Beautiful Bill Act (OBBBA) is reshaping the tax landscape for STR investors. Gone is the uncertainty of the tax cliff we were all bracing for. In its place are powerful, permanent deductions and a clear path to maximizing after-tax returns.

The return of 100% bonus depreciation means you can now fully deduct the cost of furnishing, renovating, and upgrading your property in the first year. And the newly permanent Qualified Business Income (QBI) deduction locks in long-term savings for those running their STRs like a business.

In this guide, we’ll provide a Big Beautiful Bill summary for Airbnb investors and hosts, outline what actions to take now, and suggest how to combine short-term rental tax strategies with AirDNA’s data-driven tools to grow smarter than ever before.

The Return of 100% Bonus Depreciation

Remember the slow phase-out of bonus depreciation we were bracing for? The One Big Beautiful Bill Act (OBBA) just hit rewind in a big way. As of January 1, 2025, 100% bonus depreciation is officially back for qualified property placed in service through the end of 2027. Keep in mind that this change only applies to assets placed in service in 2025 through 2030. 

Why this matters

Before the OBBBA, bonus depreciation was set to drop to 40% in 2025, 20% in 2026, and vanish altogether by 2027. Now, investors can once again deduct 100% of qualifying asset costs in the first year. This 2025 tax law change represents not just a tax deferral, but a major acceleration of deductions that can dramatically reduce your taxable income.

Here’s what qualifies:

• New and used personal property like furniture, appliances, electronics, and décor.
• Qualified Improvement Property (QIP): Interior upgrades like flooring, lighting, cabinetry, or HVAC systems.

Unlocking bonus depreciation through cost segregation 

If you're acquiring or renovating properties, cost segregation is the strategy to know. It breaks down your property into component parts with shorter depreciation timelines than rental property depreciation, which allows you to recover the property purchase cost over 27.5 years. Cost segregation reduces that timeline to 5, 7, or 15 years for certain assets, making them fully deductible immediately under the restored 100% bonus depreciation rule.

For example: An investor purchasing a $1.2 million short-term rental could use a cost segregation study to identify $400,000 in bonus-depreciable assets. With OBBBA in place, that full amount is deductible in year one, creating substantial “paper losses” that can offset real income.

If you’re investing at scale, cost segregation on a high-value property can produce six-figure deductions that offset not only rental income but potentially W-2 or business income. The key is to meet material participation thresholds, which we outline in detail in our article on the short-term rental tax loophole.

The real opportunity lies in front-loading deductions to:

• Lower your adjusted gross income (AGI) in high-earning years
• Improve cash flow and reinvest faster
• Build a more tax-efficient portfolio over time

Keep in mind that depreciation isn't a free lunch. It comes with depreciation recapture rules when you sell. That being said, the upside can far outweigh the deferred liability for long-term investors, especially those using 1031 exchanges or holding for several years.

What about section 179?

While bonus depreciation tends to grab the spotlight, Section 179 is another valuable tool in your tax toolkit. It allows STR investors who operate as a trade or business to deduct the full cost of qualifying property in the year it’s purchased and placed in service, up to annual limits.

In 2025, that limit is $1.22 million, with a phase-out starting at $3.05 million in total asset purchases. While Section 179 is more limited than bonus depreciation, it offers flexibility. You can choose which assets to expense and how much, whereas bonus depreciation must be applied uniformly.

Most STR investors will benefit from using a combination of both:

• Apply Section 179 strategically to certain high-cost assets or targeted improvements.
• Use bonus depreciation to accelerate deductions across a broader set of components,  especially following a cost segregation study.

Together, they create a powerful one-two punch for reducing taxable income and boosting first-year cash flow.

The QBI Deduction Is Here to Stay

Tax breaks tend to come and go, but the One Big Beautiful Bill Act just made the Qualified Business Income (QBI) deduction permanent. Its previous 2025 sunset date is eliminated, delivering long-term clarity for short-term rental owners.

What is QBI?

QBI, under Section 199A, allows eligible taxpayers to deduct up to 20% of their qualified business income. That’s a potentially massive savings on your federal tax bill, provided your short-term rental activity qualifies as a business and not a passive investment.

Who qualifies?

Not every rental qualifies, but here's how STR owners can meet the criteria:

• Your rental activity must be considered a "trade or business" under IRS standards.
• You can meet this test by following the 250-hour Safe Harbor (IRS Notice 2019-07), which applies to rental real estate enterprises.

To qualify under this safe harbor, you must:

• Spend 250+ hours per year on “rental services,” including advertising, cleaning, maintenance, and guest communications.
• Maintain contemporaneous records of your activities (time logs, task details, etc.).
• Treat each rental as a separate enterprise or choose to aggregate similar properties to meet the hour requirement collectively.

What this means for Airbnb investors

With QBI now a permanent fixture of the tax code, short-term rental owners who run their rentals like a business have a reliable tool for long-term tax planning.

If you’re hands-on with bookings, cleaning, guest services, and property management, there’s a strong chance you qualify. If you own multiple properties, aggregating them under one enterprise could make the 250-hour mark easier to hit.

Investors using platforms or managers can still qualify, as long as the total hours meet the threshold and you track them properly. You don’t have to do all the work yourself.

Also worth noting: the QBI deduction phases out at higher income levels—$197,300 for single filers and $394,600 for joint in 2025. Above those thresholds, the deduction may be limited unless you're in a qualified service business or meet wage/property requirements.

If you’re serious about maximizing this deduction:

• Document your hours meticulously, even if you’re not sure you’ll meet the 250.
• Talk to your CPA about whether you should treat your STR as a trade or business and whether Schedule C or Schedule E is a better fit (more on that coming up).
• Revisit your operations: Minor shifts in how you manage your property could unlock major tax benefits.

Stack Tax Strategies with Non-Passive Status

So far, we’ve covered how the One Big Beautiful Bill Act restores 100% bonus depreciation and makes the QBI deduction permanent. These are two massive wins on their own. Things get really powerful when you stack these benefits.

Achieving non-passive STR status unlocks broader deductions and actually strengthens your ability to claim the QBI deduction, too. That’s because both strategies rely on proving that your short-term rental is a legitimate business, not a passive investment.

By meeting the IRS’s material participation standards, you:

• Open up the ability to deduct STR losses against all forms of income, not just rental income.
• Build a stronger case for your STR activity to be treated as a trade or business, satisfying key QBI eligibility requirements.

If you’re running your rental like a business—actively managing guests, coordinating services, and tracking your time—you may be sitting on two of the most powerful tax strategies available to STR investors.

How the Big Beautiful Bill Affects Airbnb Income Reporting

The One Big Beautiful Bill Act changes how you might choose to report your income altogether. With 100% bonus depreciation back and the QBI deduction now permanent, many STR investors are reevaluating whether Schedule E or Schedule C offers the better tax outcome.

As a recap, Schedule E is the traditional route for rental properties. It treats your STR as a passive activity. You avoid self-employment tax, but you may face limits on QBI eligibility and can only deduct losses against passive income.

Schedule C is for businesses. If your STR qualifies as an active trade or business—especially if you provide substantial services—you’ll report income here. The trade-off? Income is subject to self-employment tax (approximately 15.3%).

With 100% bonus depreciation and QBI in play, there’s a stronger incentive than ever to qualify your STR as a business. Here’s why:

• You unlock non-passive status, which can expand how and when you apply losses.
• You secure eligibility for the QBI deduction, trimming up to 20% off your taxable STR income.
• Combined with OBBBA’s changes, those deductions are now more front-loaded and permanent.

In some cases, paying self-employment tax under Schedule C could actually result in greater net savings, thanks to the ability to deduct more and deduct sooner. The right tools can make the transition to a smarter tax strategy smoother. AirDNA and Uplisting offer integrated insights and automation to help you run your STR like a business, not just a property.

For a full breakdown of Schedule E vs. Schedule C scenarios, check out our STR tax filing guide.

What Short-Term Rental Investors Should Do Now

Take the One Big Beautiful Bill Act as an opportunity. With 100% bonus depreciation reinstated and the QBI deduction now permanent, the tax landscape for short-term rental investors has shifted dramatically. The biggest wins will go to those who act early.

Here’s how to start taking advantage of the new rules today:

Plan major renovations or furnishing purchases before year-end

Now that 100% bonus depreciation is back, every dollar you spend on qualified assets such as furniture, appliances, and upgrades can be fully deducted in the year it’s placed in service. If you’ve been holding off on a property refresh or outfitting a new listing, 2025 is the time to go all in.

Talk to your CPA about cost segregation

If you’re acquiring or renovating a high-value property, a cost segregation study could uncover hundreds of thousands in first-year deductions. Cost segregation is no longer a strategy reserved for big institutional investors. It’s now a practical play for serious hosts looking to scale smartly.

Reassess how you report income

With the added upside of QBI deductions and non-passive loss treatment, it may be worth revisiting whether your STR activity should be reported on Schedule E or Schedule C. This is a nuanced call, but it could mean the difference between basic rental income and full business-level tax optimization.

Start tracking hours and activities

Even if you’re not sure you’ll meet the IRS’s material participation thresholds, start tracking now. Detailed records open the door to more deductions later, especially if your STR begins to meet business-level standards under IRS rules.

Consider entity structure adjustments

With QBI now permanent, you may want to revisit how your rental activity is structured, especially if you’re growing your portfolio. An LLC or S-Corp setup might support more efficient tax planning under the new landscape. We’ve got a guide dedicated to whether an Airbnb LLC is for you.  

Use AirDNA to maximize your ROI

Tax strategy doesn’t exist in a vacuum. It works best when paired with smart, data-driven decisions about where and how you invest. That’s where AirDNA comes in.

• Use the AirDNA Revenue Calculator to model expected income and estimate operating expenses, then layer in projected depreciation based on your furnishing or renovation plans.
• Leverage our market data and property-level insights to identify high-performing areas that support premium pricing and justify deeper upfront investment for greater deductions.
• Benchmark your portfolio’s performance and refine your pricing strategy, so the benefits of 100% bonus depreciation are backed by real, optimized revenue.

Frequently Asked Questions

Does my short-term rental qualify for the QBI deduction?

If your short-term rental activity rises to the level of a trade or business, you could qualify for the 20% QBI deduction. Key factors include how actively you manage the property, whether you provide services to guests, and whether you meet certain hour or documentation thresholds (like the 250-hour Safe Harbor). Now is the time to reassess your operations and record-keeping to see if you qualify, since the OBBBA makes this deduction permanent.

How do I decide whether to file Schedule E or Schedule C for my Airbnb?

It depends on how you run your STR. Schedule E is typical for passive rentals with minimal guest services. You’ll avoid self-employment tax but might miss out on some business deductions. Schedule C applies if you treat your rental like a business and provide hotel-like services. While Schedule C income is subject to self-employment tax, it may allow you to qualify for QBI and non-passive loss treatment, especially under the new tax framework. Work with a tax professional to determine which route aligns best with your strategy.

Do I need to change my business structure to benefit from the One Big Beautiful Bill Act?

Not necessarily, but it could help. If you’re growing your portfolio or treating your STR like a business, forming an LLC or S-Corp may provide added tax flexibility and liability protection. While the OBBBA doesn’t require any specific entity type to claim bonus depreciation or QBI, certain structures may support more efficient reporting, income splitting, or long-term tax planning. Consult a CPA familiar with real estate investing to evaluate what structure aligns with your goals.

How does AirDNA help with short-term rental tax planning?

AirDNA gives you the tools to make smarter, more profitable decisions before tax season rolls around. Use the Revenue Calculator to estimate operating expenses, model potential income, and forecast how much depreciation might offset your earnings. With market-level data and property benchmarks, you can justify bigger investments (and bigger deductions), while tools like rate recommendations help ensure you’re pricing effectively year-round to maximize your return on investment.