STR Bonus Depreciation Rules

[Karen Kushner]

Hi All,

Looking to buy a STR at the Jersey Shore this year, meet the material participation requirement/100 hrs, and take bonus depreciation on the unit for 2024. I have a few questions regarding this strategy:

1. What is the minimum number of stays/time needed to satisfy the STR requirement? If we purchase in the fall, we may only be able to get 1 or 2 weeks rented. I know the average length of stay needs to be 7 days or less.

2. Can we qualify for a full year of depreciation if we only own the property for part of the year?

3. 60% Bonus Depreciation in 2024: Does this apply to the building only?

4. If bonus depreciation is taken in 2024, how is the remaining 40% depreciated? Is this over an expedited timeline?

5. Is a cost segregation study even necessary to get bonus depreciation?

Looking ahead to 2025, our strategy would be to buy a second STR. My plan would be to actively manage the new property and hire a property management company to manage the first property. Essentially we would actively manage each new property for the first year in service, take bonus depreciation on it, then 1031 exchange for another.

1. Is this strategy allowed? Is there anything prohibiting me from doing this tax-wise?

Thanks so much!