DepreciMax Study: Ranking STR Markets by Bonus Depreciation

First, the medals are marketing, not tax law. The Diamond, Gold, Silver and Bronze labels are the study’s own screening tiers, set at bonus-eligible percentages that mark roughly the top slice of its distribution. A property at 23.9% does not suddenly become a bad deal, and one at 24.1% does not automatically become a good one. But we like diamonds and gold, and most things silver.

It is a tax map, not a demand map. The whole list sorts on bonus-eligible percentage (the BEP, and Yes, we just made that up) of purchase price. There is no occupancy, no nightly rate, no seasonality in it. It is not the inverse of a demand ranking, since the study does not measure demand at all, but it is an entirely different map. Markets tend to rank high because land is cheaper and the properties carry more bonus-eligible amenities, not because guests are lining up. Worth noting, several of the trophy markets investors chase for revenue, the Aspens and Hamptons of the world, land in the study’s own “markets that miss” list. Read it as a “where does cost seg pencil” screen, not a “where do STRs perform” screen, and you will use it right.

The dollars are modeled, not measured, and the classifications deserve a closer look. The estimates come from AI reading listing photos and applying assumed costs. The porcelain tile is the cleanest example. On the Joshua Tree case study, roughly $74,000 of porcelain tile flooring throughout lands in the 5-year bucket on a 2,847 square foot home, about $26 a foot. The per-foot number is fine. The classification is the soft spot, because permanently affixed tile is ordinarily part of the 39-year building, not 5-year personal property. The IRS Cost Segregation Audit Techniques Guide puts permanently installed ceramic and similar tile in Section 1250 building property. As such, be careful since not all that glitters is gold.

And tile is not the only one. The study also treats screened porches, decks, built-in fireplaces and inserts, custom cabinetry, built-in cubbies, timber accent ceilings, radiant floor heat and a few other fact-sensitive components as categorically bonus depreciation-eligible. Some of those can qualify depending on how they are built, what they do, and how they relate to the building. Others are ordinarily structural. The IRS residential rental matrix, for one, places built-in cabinetry and built-in fireplaces in Section 1250 building property. That does not make the estimate useless, but it does raise the possibility that some of the rankings are lifted by aggressive classifications, not merely rough pricing. Either way, treat the individual line items as preliminary rather than return-ready.

Sidebar: For most single-family homes, we see fully-engineered cost segregation studies coming in at 28% to 30% of the building value. This is from seeing hundreds of reports every year. Yes, every year.

One more bit of perspective. The preview does not hand over enough detail to fully test the statistical reliability of every ranking. We do not see market-level sample sizes or confidence ranges here, and the deeper calibration lives in separate technical materials. That does not make the list meaningless. On the contrary! Estimating nearly 1,700 listings across 197 markets is a real starting point, especially for someone who otherwise has no idea where to begin. Just treat the rankings asl screening data, not proof that market number 12 is definitively better than market number 18.

The Biggest Thing It Can’t See: Local Rules and HOAs

This is the big one, and it is not really a knock on the study so much as a reminder of what no photo model can catch. The ranking says nothing about whether you can legally run a short-term rental at the address. Its inputs are land ratios, listing photos, and state conformity, and none of those know about a city ordinance, a county permit cap, or an HOA covenant. Plenty of towns have moratoriums, permit limits, or primary-residence-only rules, and plenty of HOAs quietly ban rentals under 30 days no matter what the town allows. Yuck.

That matters more than the tax math, because it comes first. You could screen this list, find a top market, buy the perfect amenity-loaded cabin, and then learn the property cannot operate as an STR at all. At that point, the rental property might never be placed in service for the STR use you planned. Pivot to a traditional long-term rental and the losses will generally be passive unless another exception applies, such as real estate professional status, and the bonus depreciation deduction you bought the place for might be stuck carrying forward against future passive income. Confirm local ordinances and HOA rules before any of the tax math matters.

To its credit, the study never claims otherwise. There is an inferred “your mileage may vary” running under the whole thing, the same throwback disclaimer every car commercial has closed with for forty years. It is a prospecting estimate, not a filed number, and it tells you so.