Cost Segregation in Sedona, AZ: $168,000 in Accelerated Depreciation

Sedona's red-rock tourism, wellness retreat market, and limited STR supply create strong nightly rates that make cost segregation highly effective for STR investors.

$168,000 Accelerated Depreciation
$62,160 Est. Year-1 Tax Savings
78x Return on Study Cost

See Your Sedona Tax Savings

$62,160
Estimated Year-1 Tax Savings
$168,000
Accelerated Deductions
$795
Study Cost
78x
ROI on Study
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Estimates are for illustration only. Details

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MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class
$168,000 total reclassified into shorter recovery periods
5-Year Property $117,600
70%
7-Year Property $13,440
8%
15-Year Property $36,960
22%
Estimated Year-1 Tax Savings $62,160

Illustrative estimate. Final allocations vary based on property facts and report findings.

Method
Year-1 Deduction
Difference
Standard (27.5yr straight-line)
$20,364
—
With Cost Segregation + Bonus
$168,000
+$147,636
Estimated deduction based on typical cost segregation allocations for airbnb / short-term rental properties. Actual study results may vary based on property-specific analysis including age, condition, renovations, and local construction costs.

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Cost Segregation in Sedona, AZ

$700,000 Airbnb / Short-Term Rental property — cost segregation depreciation example
Top Neighborhoods
Uptown Sedona, West Sedona, Village of Oak Creek
Typical Year-1 Savings
$32,000–$65,000

Sedona attracts over 3 million visitors annually, drawn by the red-rock landscape, hiking trails, luxury spa resorts, and a growing wellness tourism segment. The STR market benefits from limited hotel inventory and strict development restrictions that constrain new supply, supporting premium nightly rates. Investor purchases typically fall in the $500K–$900K range for STR-viable properties in West Sedona, the Village of Oak Creek, and uptown areas.

At $700,000, a Sedona STR has a depreciable basis of approximately $560,000. Cost segregation reclassifies $168,000 into 5-year and 15-year MACRS classes. Sedona STR properties frequently feature luxury amenities — outdoor living areas, hot tubs, fire pits, desert landscaping, and upscale furnishing packages — all contributing to the 5-year and 15-year reclassifiable totals. With 100% bonus depreciation, the full $168,000 is deductible in year one, producing $62,160 in federal tax savings.

Arizona's flat 2.5% state income tax is among the lowest in the country, keeping the cost segregation benefit predominantly at the federal level. Sedona's municipal STR regulations require permits in certain zones, but the cost segregation benefit applies regardless of local licensing requirements. Material participation is achievable for investors who actively manage their property, and results vary based on the home's age, construction quality, and renovation scope.

Why Cost Segregation Works for Short-Term Rentals

Short-term rentals contain a higher concentration of depreciable personal property than almost any other residential property type. Furniture, appliances, linens, kitchenware, electronics, decorative fixtures, and specialty items like hot tubs or game room equipment all qualify as 5-year property under the IRS MACRS classification system. This furniture, fixtures, and equipment (FF&E) component typically represents 15-20% of the depreciable basis.

Beyond interior components, site improvements add additional reclassification value. Driveways, walkways, patios, outdoor lighting, fencing, landscaping, and irrigation systems fall into the 15-year MACRS class rather than the default 27.5-year residential schedule. For STR properties with pools, outdoor kitchens, or fire pits, these components can represent a meaningful share of the total reclassified amount.

With 100% bonus depreciation permanently restored under the One Big Beautiful Bill Act (signed July 2025), every dollar reclassified into 5-year, 7-year, or 15-year MACRS classes is deductible in full in the first year. For STR owners who materially participate in their rental operation, these accelerated deductions can offset W-2 and business income — not just passive rental income.

Who This Example Applies To

If your property is a passive investment managed entirely by a third party, the accelerated depreciation may only offset passive income. If your property has minimal furnishings or you plan to sell within 1-2 years, the benefit may be reduced. Actual results vary based on property age, condition, renovations, and local construction costs.

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Compare: Airbnb / Short-Term Rental at Different Price Points

Price Accelerated Tax Savings Study Cost ROI
$300K $72,000 $26,640 $795 34x
$500K $120,000 $44,400 $795 56x
$750K $180,000 $66,600 $795 84x
$1M $240,000 $88,800 $1,195 74x
$400K $96,000 $35,520 $795 45x
$600K $144,000 $53,280 $795 67x
$1.5M $360,000 $133,200 $1,195 111x
$450K $108,000 $39,960 $795 50x
$700K $168,000 $62,160 $795 78x
$800K $192,000 $71,040 $795 89x

Frequently Asked Questions

What is a cost segregation study? ▼

A cost segregation study is an engineering-based analysis that reclassifies components of your property into shorter IRS depreciation categories (5, 7, and 15 years) instead of the default 27.5 or 39 years. This accelerates your depreciation deductions, reducing your tax bill in the early years of ownership.

How does bonus depreciation work with Airbnb properties? ▼

Under the One Big Beautiful Bill Act (signed July 2025), 100% bonus depreciation is permanently restored for 2025 and beyond. This means every dollar of depreciation reclassified into 5-year, 7-year, or 15-year MACRS classes through cost segregation can be deducted in full in the first year you place the property in service.

How long does a cost segregation study take? ▼

Our studies are delivered in 3-5 business days. You provide the property address, purchase price, and closing date — we handle everything else using assessor records, satellite imagery, and construction cost databases. No site visit or tenant disruption required.

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