When you buy a building, the IRS normally makes you deduct its cost slowly — over 27.5 years (residential rental) or 39 years (commercial, including Airbnbs). A cost segregation study identifies parts of the building that legally qualify for much faster depreciation — 5, 7, or 15 years — such as flooring, fixtures, appliances, cabinetry, landscaping, parking, and sidewalks. Those parts qualify for bonus depreciation and can be written off in year one.

It's a timing benefit, not free money. A study doesn't create new deductions — you'd depreciate the whole building eventually anyway. It simply pulls a large chunk into the first year. The benefit is the time-value of that money.

Short-term rentals involve two separate rules — don't conflate them. For depreciation: if the average guest stay is about 30 days or less (transient use), the IRS usually treats the property as commercial (39-year), not residential — even though it's a house. Separately, if the average stay is about 7 days or less and you materially participate, the losses can be treated as non-passive (the "STR loophole") — a different rule with different consequences. Both are judgment calls — confirm your classification with your CPA.