Short-term rentals
Cost segregation for STR owners — where the loophole meets the evidence
Short-term rental owners have the strongest cost segregation story in real estate: when your average stay is 7 days or less and you materially participate, the activity is non-passive under Reg. §1.469-1T(e)(3) — meaning the large first-year depreciation a study unlocks can offset W-2 and business income, not just rental income.
STR properties also reclassify unusually well: furniture packages, appliances, decorative lighting, window treatments, hot tubs, and site amenities are exactly the 5/7/15-year property a study documents. Hospitality-grade properties commonly see 20–30% of depreciable basis reclassified.
Why the evidence matters more for STRs
The STR exception is well known to the IRS. A study that offsets active income should expect scrutiny — which is why Cost Seg Atlas qualifies your property against all six IRS methodologies, links every component line to a photo, document, or cited price source, and grades the study file against the 13 quality elements from IRS Pub 5653 before you file. Your walkthrough video becomes the documented site inspection; your furnishing receipts become actual-cost records.
Pair it with a material-participation log and the §481(a) look-back on properties you already own, and the study becomes a defensible position instead of a red flag.