A short-term rental where the majority of guest stays run under 30 days is nonresidential real property with a 39-year recovery period. The 27.5-year residential schedule only applies to buildings that meet the definition of residential rental property, and most Airbnb-style operations fail that definition.
The transient-use test in IRS Pub 946
IRS Pub 946 defines residential rental property as a building where 80 percent or more of gross rental income comes from dwelling units. The same publication excludes from the definition of a dwelling unit any unit in a hotel, motel, or similar establishment where more than half the units are used on a transient basis, and short stays, generally under 30 days, are transient use. A house rented nightly or weekly through a booking platform is operating as lodging, so the building falls out of the residential definition and lands in 39-year nonresidential real property under MACRS.
The classification follows actual use for the year, not zoning or how the property looks. The same single-family home can be 39-year property in a year it runs as a short-term rental and 27.5-year property in a year it carries a 12-month tenant.
What the longer recovery period costs
Take a $750,000 lakefront cabin with $150,000 allocated to land, leaving $600,000 of depreciable building basis. Over 27.5 years the straight-line deduction is about $21,818 per year. Over 39 years it is about $15,385. That is roughly $6,433 less in deductions every year. It is timing rather than lost money, but timing is the whole point of depreciation strategy.
Cost segregation closes most of the gap
The 39-year label applies to the building shell. A cost segregation study reclassifies components such as flooring, appliances, millwork, decks, and land improvements into 5, 7, and 15 year classes, and those classes qualify for bonus depreciation under IRC section 168(k). The July 2025 law known as OBBBA made 100 percent bonus depreciation permanent for qualified property acquired after January 19, 2025. Property acquired on or before that date keeps the older phase-down, which is 40 percent for 2025 placements. In practice, an owner who moves 25 to 30 percent of the basis into short-life classes deducts far more in year 1 than either straight-line schedule allows. Amadae's cost segregation screen estimates that reclassification and the first-year benefit before you pay for an engineering study, and its MACRS schedules carry 39-year assets correctly on the filed return.
When 27.5 years still applies
If average stays run 30 days or more, for example monthly furnished rentals or travel-nurse housing, the units remain dwelling units and the building stays at 27.5 years. Also keep this test separate from the 7-day average stay rule in Treasury Reg 1.469-1T(e)(3). That rule decides whether losses are automatically passive, not how fast the building depreciates. A short-term rental can be 39-year property and still generate non-passive losses, and a long-term rental can be 27.5-year property whose losses stay fully passive.