By Murat Gocmen, Broker, Real Estate Tahoe | Firm: CA DRE #02235314 · NV B.1003327.LLC | September 2026
Real Estate Tahoe's short answer: yes, mechanically it always works, because a study moves part of the building's cost into 5-, 7- and 15-year property that qualifies for 100 percent bonus depreciation, permanent for property acquired after January 19 2025. Whether that deduction offsets your other income depends on three gates: average stays of seven days or less so the activity is not a passive rental, material participation (the 100-hours-and-more-than-anyone-else test is the usual route, and a hands-off owner with a full-service manager fails it), and personal use under the greater of 14 days or 10 percent of rented days. The California catch is that California does not conform to bonus depreciation, so a California-side home, or a California resident owning on the Nevada side, gets the federal write-off but not the state one. Real Estate Tahoe's projection tool estimates the first-year write-off on every listing; it is not tax advice, and the CPA decides.
What a cost segregation study actually does
You depreciate the building, never the land (IRS Publication 946: "You cannot depreciate the cost of land"). A study breaks the building apart. The IRS Cost Segregation Audit Techniques Guide describes allocating costs to Section 1245 property such as carpeting, wall coverings, partitions, millwork and lighting fixtures, with 5-, 7- or 15-year lives that are eligible for bonus depreciation.
No IRS source states a typical share reclassified. Real Estate Tahoe's projection tool assumes land is 25 percent of price (or the assessor's actual split when available) and that a study moves 18 percent of the depreciable basis into 5-year property and 10 percent into 15-year property: about 28 percent of the improvement basis, about 21 percent of price.
| Real Estate Tahoe estimating model | Amount |
|---|---|
| Purchase price | $1,200,000 |
| Land, 25 percent, never depreciable | $300,000 |
| Depreciable basis | $900,000 |
| 5-year property, 18 percent of basis | $162,000 |
| 15-year property, 10 percent of basis | $90,000 |
| First-year bonus-eligible write-off (21 percent of price) | $252,000 |
| Residual shell, 27.5 or 39 years | $648,000 |
That is an estimate of what a study would likely find, not what you will deduct. Real Estate Tahoe is a brokerage, not a tax or legal adviser; every number here is a planning figure for your CPA or tax attorney.
27.5 or 39 years, and why it does not change the study's value
IRC Section 168(e)(2)(A) treats a building as 27.5-year residential rental property when 80 percent or more of gross rents come from dwelling units, but excludes a unit in a hotel, motel or other establishment where more than half the units are used on a transient basis; everything else is 39-year under Section 168(c). "Transient basis" is undefined, so a whole-home Airbnb on short stays is arguably all transient. Conservative preparers use 39 years, many still use 27.5, and it is a CPA judgment call. Either way the study finds the same components; only the residual shell, the $648,000 above, moves.
Bonus depreciation after the 2025 law
Public Law 119-21 (section 70301) rewrote Section 168(k) to allow 100 percent of the adjusted basis of qualified property, permanently, for property acquired after January 19 2025, confirmed in IRS IR-2026-06 and Notice 2026-11. Details at bonus depreciation for a Lake Tahoe STR.
- Qualified property needs a recovery period of 20 years or less, so the 5-, 7- and 15-year components qualify and the shell does not.
- Used property qualifies if you never used it before buying and did not buy from a related party.
- Binding-contract trap: property under a written binding contract signed before January 20 2025 is treated as acquired earlier (Notice 2026-11; Reg. 1.168(k)-2(b)(5)) and keeps the older percentage.
- A 40 percent election exists for the first tax year ending after January 19 2025 (section 70301(b)(3)).
The three gates that decide whether the loss offsets your other income
Gate one: average stays of seven days or less
Under IRC Section 469(c)(2) any rental activity is passive, and passive losses only offset passive income. Reg. 1.469-1T(e)(3)(ii) makes an exception when the average period of customer use is seven days or less (or 30 days or less with significant personal services, which cleaning between stays is not: services similar to those provided with long-term rentals are excluded under (e)(3)(iv)(B)).
Gate two: material participation
The loss is non-passive only if you materially participate, which Section 469(h)(1) calls regular, continuous and substantial, under one of seven tests in Reg. 1.469-5T(a) (500-plus hours; substantially all participation; 100-plus hours and not less than any other individual; 500 hours across significant-participation activities; five of the prior ten years; personal service activity; facts and circumstances). The practical test for a Tahoe owner is the third: more than 100 hours and not less than anyone else, including your manager and cleaner. Spouse hours count, investor work such as reviewing statements does not, and keep a contemporaneous log. A hands-off owner with a full-service manager usually fails because the manager's hours exceed the owner's.
Gate three: personal use under Section 280A
If personal use exceeds the greater of 14 days or 10 percent of rental days, the home is a residence under Section 280A, and IRS Topic 415 says excess rental expenses cannot offset other income; they carry forward inside the property. A Tahoe Donner cabin used 30 family nights a year can still be cost-segregated, but the deductions are trapped, not lost.
What happens when a gate fails
Fail gate one or two and the loss is passive, carried forward against passive income only. Fail gate three and the loss stays inside the property until rental income absorbs it.
The California catch
California does not conform to bonus depreciation (FTB summary of P.L. 119-21; FTB Publication 1001). It does conform to MACRS recovery periods (R&TC 17250), so the study still shortens California lives. California's Section 179 limit is $25,000, phased out above $200,000 of purchases (FTB 3885 instructions). California residents are taxed on all income regardless of source, so a California resident with an Incline Village STR gets no state bonus either. Nevada has no personal income tax (Nevada Constitution Art. 10 Sec. 1(9)); more on that choice at California or Nevada side for a Tahoe Airbnb.
| Situation | Federal | California |
|---|---|---|
| California-side home (South Lake Tahoe, El Dorado, Placer, Truckee), any owner | 100 percent bonus on the components | Regular MACRS lives, FTB 3885A adjustment, basis difference tracked to sale |
| Nevada-side home (Washoe: Incline Village, Crystal Bay; Douglas: Stateline, Zephyr Cove, Glenbrook, Round Hill), Nevada resident | 100 percent bonus | None; no state income tax |
| Nevada-side home, California resident | 100 percent bonus | Same as the California-side case |
Recapture at sale: a timing benefit, not free money
At sale, gain on the components is ordinary income up to the depreciation taken (Section 1245, Publication 544), and building depreciation is unrecaptured Section 1250 gain taxed at a maximum 25 percent (IRS Topic 409). The study is an interest-free loan: the deduction is the loan, recapture at a later sale is the repayment, unless you hold or exchange. A 1031 exchange defers the recapture with the gain to the extent no boot is received; the sale side is at capital gains tax when selling a Tahoe second home.
Look-back studies for a home you already own
Reclassifying a building already placed in service is a change in accounting method, which cannot be done by amending a return. The route is the automatic change in Rev. Proc. 2025-23 section 6.01 for a Form 3115 filed on or after June 9 2025; missed depreciation comes back as a one-year negative Section 481(a) adjustment (Form 3115 instructions), with no user fee. Property bought before January 20 2025 keeps its acquisition year's bonus percentage; a 2023 purchase does not get 100 percent.
QBI and NIIT side effects
The 20 percent qualified business income deduction under Section 199A requires a Section 162 trade or business; the rental safe harbor is 250 or more hours a year and excludes a Section 280A residence, and a 100 percent bonus year can push QBI negative, which carries forward. The 3.8 percent net investment income tax does not apply to a seven-day-exception rental that rises to a Section 162 trade or business in which you materially participated (Form 8960 instructions).
Who to hire and what a quality study contains
The Audit Techniques Guide sets no preparer qualifications but says a study by a construction engineer is more reliable than one by someone without that background, and tells examiners to closely scrutinize contingency-fee studies. Studies are priced by project size; hire an engineering-based firm on a fixed fee. The guide's 13 elements of a quality study include expertise, a detailed methodology, documentation, interviews, reconciliation to actual costs and an itemized listing of Section 1245 property.
How Real Estate Tahoe uses this
Every listing in the Real Estate Tahoe home search shows a projected first-year write-off next to the parcel's STR-eligibility verdict. We verify eligibility parcel by parcel before a buyer writes an offer; the county rules are at Lake Tahoe STR rules, and an existing permit never transfers to a buyer. Then run revenue (how much a Tahoe Airbnb makes, how I underwrite a Lake Tahoe STR) and take the estimate, expected stay length, hours and personal-use plan to the CPA before the offer.
I operate 45 Lake Tahoe short-term rentals through MG Vacation Rentals across these jurisdictions, so I know how quickly the hours vanish from your log once a manager takes over. Weigh that against the risks of buying a Lake Tahoe Airbnb before self-managing for the deduction.
Watch: the hours test that disqualifies people
You have to participate more than anyone else. Not tax advice, talk to your CPA.
Watch: the recapture nobody mentions
The deduction is real and so is the recapture on sale. Not tax advice, talk to your CPA.
Frequently asked questions
Does cost segregation work for a Lake Tahoe Airbnb?
Yes, mechanically: a study reclassifies part of the building into 5-, 7- and 15-year property that qualifies for 100 percent bonus depreciation on property acquired after January 19 2025. Using the loss against other income depends on seven-day average stays, material participation and personal use. Real Estate Tahoe estimates the write-off on every listing; your CPA confirms it.
How much can I write off in the first year?
The Real Estate Tahoe model estimates about 21 percent of the purchase price: 25 percent land, then 18 percent of the depreciable basis to 5-year property and 10 percent to 15-year property. On a $1,200,000 home that is $252,000, an estimate of what a study would likely find, not a promise.
Can I use the loss if a property manager runs my Airbnb?
Usually not. Short stays avoid the passive rental rule, but the loss is non-passive only if you materially participate, in practice more than 100 hours and not less than anyone else, including the manager and cleaner. A hands-off owner fails, so the loss is passive and carries forward against passive income.
Does California allow bonus depreciation on a Tahoe rental?
No. A California-side home gets the federal 100 percent write-off but regular MACRS lives on the California return, with an FTB 3885A adjustment. A California resident owning in Incline Village or Stateline is in the same position; a Nevada resident on the Nevada side has no state layer.
Sources
- IRS Cost Segregation Audit Techniques Guide (Pub 5653) (what a study does, Section 1245 reclassification, burden of proof, preparer qualifications, contingency fees, the 13 elements, no amended return for a method change)
- IRS Publication 946, How to Depreciate Property (land is not depreciable; used property qualifies if not previously used by you)
- 26 U.S.C. 168 (residential rental definition and transient exclusion, 27.5 and 39-year lives, bonus depreciation at 168(k))
- Public Law 119-21, section 70301 (permanent 100 percent bonus for property acquired after January 19 2025; 40 percent election)
- IRS IR-2026-06 (IRS confirmation of the permanent 100 percent deduction)
- IRS Notice 2026-11 (binding-contract acquisition-date rule)
- IRS Publication 527, Residential Rental Property (personal-use limits; substantial services and Schedule C)
- 26 U.S.C. 469 (passive activity rules, material participation)
- Reg. 1.469-1T (seven-day and 30-day exceptions; cleaning is not a significant personal service)
- Reg. 1.469-5T (the seven material participation tests, spouse hours, investor work, proof of hours)
- IRS Topic 415, Renting Residential and Vacation Property (Section 280A residence rule and limited losses)
- IRS Publication 544, Sales and Other Dispositions of Assets (Section 1245 recapture; 1031 deferral)
- IRS Topic 409, Capital Gains and Losses (unrecaptured Section 1250 gain at a maximum 25 percent)
- Rev. Proc. 2025-23 (automatic accounting method change for cost segregation, section 6.01)
- Form 3115 instructions (one-year negative Section 481(a) adjustment)
- FTB Summary of Federal Income Tax Changes, P.L. 119-21 (California does not conform to bonus depreciation)
- FTB Publication 1001 (California nonconformity to bonus depreciation)
- FTB 3885 instructions (California Section 179 limit of $25,000, phase-out above $200,000)
- FTB residency status (California residents taxed on all income regardless of source)
- IRS Section 199A FAQs (QBI trade-or-business requirement, 250-hour rental safe harbor, 280A exclusion)
- Form 8960 instructions (NIIT exception for a materially participated seven-day-or-less rental that is a trade or business)
Search Lake Tahoe homes with the STR-eligibility filter and the first-year write-off estimate at /properties/. Then read the county-by-county rules at Lake Tahoe STR rules before you write the offer.
