Big Beautiful Bill (2025) and Your STR: Tax Wins, Easy Math, and What It Means for Hosts
If you’ve been wondering whether that massive 2025 tax law (dubbed the One Big Beautiful Bill Act – OBBBA) could benefit your short-term rental (STR) business, the answer is: Yes, and quite a bit. Even better? Understanding how doesn’t have to feel like decoding a tax code novel. Let’s walk through the key changes, break down real-world examples, and keep it friendly.
What’s This Bill Anyway?
Signed into law on July 4, 2025, the OBBBA is a sweeping tax and spending package packed with high-impact changes for US property investors – including STR hosts. It makes a few things permanent, brings back some goodies, and even gives a tax break to high-tax states. (Wikipedia)
Why STR hosts should care:
- Bonus depreciation is fully restored. You can now expense much of your upgrades immediately.
- The Qualified Business Income (QBI) deduction (20%) is now permanent, which is good news for STRs structured as LLCs or S-corps.
- The State and Local Tax (SALT) deduction cap is vastly increased: from $10,000 to up to $40,000 for many filers, for a five-year period. (Coastal Equity Group, National Association of REALTORS®)
Let’s dig into each and see what that actually means for you.
1. Bonus Depreciation: Expedite Your Write-Offs
Before the bill: You could claim 100% bonus depreciation on eligible assets, but only through 2022. This then began phasing out. (Hall CPA)
Now: OBBBA makes 100% bonus depreciation available again for qualifying assets…think new furnishings, appliances, flooring upgrades through 2029. (Beyond Pricing, AirDNA)
Example math for STR hosts:
- You spend $20,000 on a mini-reno and new appliances.
- With bonus depreciation, you deduct $20,000 immediately on 2025 taxes.
If you’re in the 25% tax bracket, that’s a $5,000 saved on your tax bill this year, all in one move. Without it? You’d claim smaller deductions over multiple years (straight-line depreciation), delaying the benefit.
2. Permanent QBI Deduction: Your Rental Income Gets a Break
Previously: The QBI deduction expired in 2025.
Now: It’s permanent under the OBBBA. If your STR is set up as an LLC, partnership, or S-corp, you’re eligible to deduct up to 20% of your qualified rental income. (Beyond Pricing, Rent Branson)
Example math:
- Your STR nets $50,000 in income for the year.
- 20% of that ($10,000) is deductible.
- If you’re in the 24% tax bracket, that equates to $2,400 in federal tax savings.
3. SALT Deduction Cap Expands (Temporarily)
When thinking about state & local taxes (like property taxes), previously, your ability to deduct them on your federal return was capped at $10,000. Now, for five years, that cap is up to $40,000, depending on your income level. (Wikipedia, Coastal Equity Group)
Why this matters for STR hosts in high-tax states, say, California or New York:
Say you paid $30,000 in combined state income and property taxes.
Before OBBBA: Only $10K deductible.
Now: You can deduct $30K – much higher tax savings.
If you’re in a 24% bracket, that’s an extra $4,800 in tax savings. Not bad!
4. Bonus Perks & Watch-Outs
- Made safe: Bonus depreciation is back and the QBI deduction is locked in – no surprise expiration looming.
- Temporary: SALT expansion is for a limited time (2025–2029). Mark your calendars for 2030! (Wikipedia)
- Less windfall, more growth: The big savings mean more capital to reinvest in your STR (design updates, tech upgrades, or expansion).
5. Side Story: STR Tax Shifts Abroad & State-Level Moves
Not U.S. based? Here’s what else is going on:
- Spain is considering a 21% VAT on short-term rentals (double hotel rates) to reprioritize long-term housing. (Reuters)
- Hawaii is adding a 0.75% STR tax, making total lodging tax near 19%, specifically raising funds for climate resilience. (The Guardian, AP News)
So globally, the concept of targeting STRs for revenue collection is growing, and you may want to factor local policy into your planning.
6. Summarized Example: All Changes in One Place
Let’s combine the math for an STR in a high-tax U.S. state:
| Benefit | Amount | Outcome |
|---|---|---|
| Bonus Depreciation | $20,000 | Saves ~$5,000 in tax now |
| QBI Deduction | $10,000 | Saves ~$2,400 |
| SALT Deduction Extra | $20,000 | Saves ~$4,800 |
| Total Estimated Tax Savings | — | ~$12,200 |
That effectively lowers your taxable income, increases cash flow, and gives you capital to reinvest, all in the first year.
7. What Hosts Should Do Next
Talk to your tax pro. Confirm your STR structure qualifies for QBI, depreciation rules, and SALT.
Plan your 2025 capital upgrades now, like smart TVs, comfy mattresses, or improved kitchens, as expenses could be fully deductible this year.
Track state and local tax changes. Laws are shifting fast, especially in popular vacation markets (Hawaii, Europe, etc.).
Use tools or software for rental income tracking. They’ll help structure deductions and depreciation calculations.
Final Thoughts, in Friendly Terms :o)
Think of the OBBBA as your STR’s new safety vest. It’s not free money, but it gives you more room to breathe, invest, and scale up, without an immediate squeeze from Uncle Sam. Whether you’re lounging in your STR or looking to grow your portfolio, this is a tax move worth riding.
