Unlocking Big Tax Savings: How Arizona STR Owners Can Use Bonus Depreciation in 2025

One of the most overlooked benefits of owning a short-term rental (STR) is the ability to take accelerated depreciation on your property. For investors with high W-9 income, this can be a game-changer — often saving tens or even hundreds of thousands of dollars in taxes in the very first year. At HomeSlice Stays, we don’t just manage your property — we help you understand the numbers that make STR ownership one of the most tax-efficient investments available.

What Is STR Bonus Depreciation?

Under current tax law, short-term rentals can qualify for 100% bonus depreciation on certain property components through a cost segregation study. This breaks your property into separate asset classes (like furniture, appliances, flooring, and even parts of the structure) that can be depreciated over 5, 7, or 15 years — instead of the standard 27.5 years.

Why it matters:
- If your STR qualifies as a business activity (not passive income), you can use that depreciation to offset active W-9 income.
- The result? Massive first-year tax deductions that free up cash to reinvest.

Example: Buying a $1M Vacation Rental in Arizona

Let’s say you purchase a $1,000,000 home in Scottsdale in early 2025, fully furnished and ready for STR use.

Step 1 – Cost Segregation Study
A professional study may allocate 25–35% of the property’s value to assets eligible for accelerated depreciation.
For this example:
- $1,000,000 purchase price (land excluded at $200,000)
- Depreciable basis = $800,000
- Allocated to short-life assets = $240,000 (30% of basis)

Step 2 – Bonus Depreciation
Because these assets have shorter useful lives, you can take 100% bonus depreciation in year one:
- First-year deduction = $240,000

Step 3 – Applying to W-9 Income
If you have $400,000 in W-9 income, that $240,000 deduction could:
- Drop your taxable income to $160,000
- Potentially save $84,000 in federal taxes (assuming a 35% tax rate)
- Plus state income tax savings if applicable

Key Qualification Rules

To use STR depreciation against W-9 income, the IRS generally requires:
- The property is rented on average for 7 days or less per guest stay (typical for STRs).
- You materially participate in the rental activity (or use a property manager like HomeSlice Stays while still qualifying under certain rules).
- Proper records, logs, and tax filings are maintained.

Why 2025 Is the Year to Act

Bonus depreciation is being phased down from its peak — but 2025 still offers substantial benefits for investors who move now. Combining tax savings with Arizona’s growing STR market means you can:
- Reduce your tax bill dramatically
- Increase your available capital for property upgrades
- Boost overall return on investment from year one

How HomeSlice Stays Helps You Leverage This Strategy

We provide:
- Connections to cost segregation specialists
- Guidance to ensure your STR qualifies under IRS guidelines
- Booking management to meet average stay requirements
- Financial reporting for your CPA
- Revenue optimization to maximize earnings

Final word: If you’re a high-income earner looking to add an Arizona STR to your portfolio, the tax depreciation advantage can put five or six figures back into your pocket in the first year alone. Contact HomeSlice Stays today to pair expert property management with smart tax planning to maximize both your earnings and your tax savings.