- $625K Palm Springs MCM 2BR at 37% bracket: ~$52,815 Year-1 federal + ~$2,710 CA Year-1 (at top CA bracket). The federal piece is ~95% of the Year-1 benefit.
- $895K Rancho Mirage 3BR pool home at 37%: ~$83,422 Year-1 federal + ~$4,285 CA Year-1.
- $1.45M La Quinta luxury estate at 37%: ~$153,624 Year-1 federal + ~$7,890 CA Year-1.
- The STR short-term rental loophole is what makes these Year-1 deductions usable against W-2 income. Average stay ≤7 days + material participation = non-passive activity = W-2 offset eligible.
Year-1 federal tax savings — Coachella Valley STR
Assumes 100% bonus depreciation (OBBBA 2025+), 27.7% median reclassification (Coachella Valley furnished STR), and 24% Palm Desert-median land allocation. Indian Wells properties skew higher land (lower reclass $); Cathedral City / Desert Hot Springs skew lower land (higher reclass $).
| Purchase price | 22% bracket | 24% bracket | 32% bracket | 35% bracket | 37% bracket |
|---|---|---|---|---|---|
| $400K | $18,524 | $20,208 | $26,944 | $29,469 | $31,153 |
| $625K | $28,944 | $31,575 | $42,100 | $46,047 | $48,678 |
| $750K | $34,733 | $37,890 | $50,520 | $55,257 | $58,413 |
| $895K | $41,447 | $45,215 | $60,287 | $65,939 | $69,708 |
| $1.25M | $57,888 | $63,150 | $84,200 | $92,094 | $97,356 |
| $1.45M | $67,150 | $73,254 | $97,672 | $106,820 | $112,925 |
| $2.0M | $92,621 | $101,040 | $134,720 | $147,332 | $155,750 |
| $3.0M | $138,932 | $151,560 | $202,080 | $220,994 | $233,624 |
| CA Schedule CA D-1 Year 1 (top CA bracket, 13.3%) | CA Year-1 ≈ reclassified × 1.9% (MACRS straight-line). E.g. $1.45M La Quinta luxury estate ≈ $7,890 CA Year-1. Accumulates to ~$55K total CA benefit over Years 2-15. | ||||
Numbers are illustrative engine-truth estimates assuming standard CV furnished STR property type, 24% land allocation (Palm Desert median), 27.7% reclass, 100% Year-1 bonus. Indian Wells properties skew higher land (lower numbers); Desert Hot Springs / Cathedral City skew lower land (higher numbers). Luxury estates (4BR+ with pool + casita) reclass 29% rather than 27.7%. Use the live calculator for property-specific estimates.
How to use this table
- Find your purchase price (round to nearest row).
- Find your federal bracket column.
- Read the intersection — that's roughly your Year-1 federal deduction at 100% bonus depreciation.
- Add the CA Schedule CA D-1 Year-1 piece (small but real).
- For a property-specific number that accounts for city, property type, and exact land allocation, run the live calculator.
FAQ
What is 100% bonus depreciation for 2025?
100% federal bonus depreciation was permanently restored by the One Big Beautiful Bill Act (OBBBA), signed in July 2025. For property placed in service on or after January 19, 2025, you take 100% of the reclassified short-life basis (5/7/15-year) as a Year-1 deduction on your federal return.
What's the catch with bonus depreciation on a Palm Springs property?
California decouples from federal §168(k) per CA R&T Code §17250 + §24349. You take 100% federal bonus Year 1, but the same components depreciate MACRS straight-line on a parallel CA Schedule CA D-1. Year-1 CA benefit is small (~1.9% of reclassified at top CA bracket); total CA benefit catches up over the 5/7/15-year recovery period. Cost Seg Smart studies include both schedules at no extra cost.
Can I offset W-2 income with this loss?
Generally, no — rental losses are passive under IRC §469 and only offset passive income. EXCEPTION: the STR short-term rental loophole. If average guest stay is ≤7 days AND you materially participate (≥500 hours, or one of the other tests), the activity is non-passive and losses CAN offset W-2/active income. This is the single biggest reason CV investors run cost seg — it unlocks the W-2 offset. Coachella + festival bookings drive short-stay revenue, which helps the ≤7-day average. Confirm material participation with your CPA.
How does this compare to Phoenix or other markets?
The federal numbers are similar across markets (federal §168(k) is federal). The CA Schedule CA D-1 piece is unique to California — Phoenix STR owners get 100% Year-1 on both federal AND Arizona returns because AZ conforms to §168(k). Florida and Tennessee have no state income tax, so the entire benefit is federal. Palm Springs federal headline is comparable; the CA stretch is the differentiator.
Does this change in future tax years?
OBBBA made 100% bonus depreciation permanent for property placed in service on or after January 19, 2025. Historical bonus rates: 80% (2023), 60% (2024), 100% (2025+). Future tax law could change this — monitor congressional action.
Cost Seg Smart Research. (2026). Palm Springs Airbnb Bonus Depreciation Savings 2026. https://palmspringscostseg.com/data/palm-springs-airbnb-bonus-depreciation-savings/Journalists, CPAs, tax professionals — email [email protected] for custom data slices.
Last reviewed: May 12, 2026. Maintained by Cost Seg Smart Research. Data is informational and does not constitute tax or legal advice. Consult a qualified CPA before filing. Cost Seg Smart is not affiliated with the IRS or any government agency.