How long is the depreciation period for my short-term rental?
The depreciation deduction is an annual tax deduction that lets you recover the cost of your property over its expected life. This annual deduction isn’t optional, and the time period for depreciating your rental property depends on whether it's considered a residential or nonresidential property.
Residential Rental Property - Your guests’ average stay is 30 days or longer.
Depreciation Period: 27.5 years.
Example: Jane rents out an apartment to travel nurses where most tenants stay for 3-6 months. Since the average stay is longer than 30 days, Jane will depreciate her property over 27.5 years.
Nonresidential Rental Property: Your guests’ average stay is less than 30 days.
Depreciation Period: 39 years.
Example: John rents out a condo he owns at a beach resort where guests generally stay for a week or two at a time. Since the average stay is less than 30 days, John will depreciate his property over 39 years.
When reporting your property in TurboTax, select the Single family option for a Residential Rental Property, and select the Commercial option for Nonresidential Rental Property. How you report will also determine if you need to file a Schedule E or a Schedule C.
Note: Short-term rentals may also qualify for additional deductions, such as:
Section 179 deduction: Allows you to deduct the full cost of new furniture in the year you buy it.
QBI deduction: Allows you to deduct up to 20% of your net rental income earned.
