Why 2025 is the best time to buy a vacation home in the US (Thanks to OBBA)

If you’re in the US in 2025, it’s never been a better time to buy a vacation home. That’s not just hype. It’s the result of a real shift in how certain vacation rentals are treated under US tax law.

With the passing of the One Big Beautiful Bill (OBBA), depreciation rules for vacation rentals and short-term rental properties changed in a way that strongly favors high-income earners. For W-2 employees, business owners, and professionals paying significant income tax, this opens the door to meaningful first-year tax savings when buying a vacation home.

What makes this especially interesting is that these benefits are tied to short-term rentals, not traditional long-term investment properties. Operated correctly, a vacation rental can now unlock depreciation that was previously out of reach for many working professionals.

In this guide, we’ll break down how OBBA works, who qualifies, and how vacation rental owners can approach this opportunity legally and strategically. We’ll also look at how the right systems can make managing an active vacation rental far more practical, including tools like Hostaway’s property management platform.

Key Takeaways

• OBBA changed depreciation rules in 2025, making first-year tax benefits for vacation rentals far more attractive.

• Short-term vacation rentals can qualify for depreciation that may offset W-2 or business income if operated actively.

• High-income earners in high-tax states often benefit the most from these rules.

• Properties must meet active participation and short-term stay requirements to qualify.

• 2025–2026 may be a limited window to take advantage of these benefits under current law.

What is OBBA, and what changed for vacation rentals in 2025?

OBBA, short for the One Big Beautiful Bill, introduced changes that directly affect how depreciation works for certain types of real estate. While depreciation itself isn’t new, OBBA shifted how quickly vacation rental owners may be able to claim it.

Traditionally, the cost of a property is depreciated slowly over many years. OBBA allows qualifying vacation rental owners to take a much larger portion of that depreciation upfront, often in the first year of ownership.

The key change is how short-term rentals are treated. Under OBBA, certain vacation rentals with short average stays can fall under different rules than long-term rentals, which are typically considered passive investments. That distinction matters because passive losses are usually restricted for W-2 earners.

For qualifying vacation rentals, OBBA makes accelerated or front-loaded depreciation possible. This can significantly reduce taxable income in the year the property is purchased.

As always, depreciation rules depend on individual circumstances, and anyone considering this strategy should confirm details with a qualified tax professional.

From an operational standpoint, running a compliant short-term rental requires organization and consistency. Many owners rely on platforms like Hostaway to centralize guest communication, listings, and daily operations while staying actively involved.

How does first-year depreciation work when buying a vacation home?

Depreciation is a tax concept that allows property owners to spread the cost of a property over time. Instead of deducting the full purchase price at once, the value of the building is deducted gradually.

What OBBA changes is timing.

Rather than spreading depreciation evenly over decades, qualifying vacation rental owners may be able to claim a large portion in the first year. Here’s a simplified example often used to illustrate the impact:

• Purchase price: $500,000

• Approximate first-year depreciation: $100,000

• Marginal tax rate: 50%

• Potential tax savings: $50,000

In this scenario, depreciation doesn’t create cash in your pocket, but it can significantly reduce the amount of income tax you owe. That effectively lowers the real cost of buying the vacation home in year one.

The actual numbers vary based on property type, usage, and personal tax situation. The important takeaway is that OBBA makes first-year depreciation far more impactful than before, especially for high-income earners.

Who benefits most from OBBA depreciation rules?

This strategy isn’t for everyone, but it can be especially compelling for a specific group of buyers.

W-2 employees with high marginal tax rates often struggle to use real estate losses because long-term rentals are usually considered passive. OBBA changes that equation for qualifying vacation rentals.

High-income professionals and business owners also tend to benefit, particularly those with steady taxable income that depreciation can offset. Investors living in high-tax states like California, New York, or New Jersey may see even greater impact due to combined state and federal tax exposure.

The common thread is consistent income. Depreciation is most useful when there’s income to offset. For people who “hate paying taxes,” this vacation rental tax strategy can be worth exploring, provided the property is operated correctly.

Tools like Hostaway can support this by helping owners stay hands-on with guest messaging, pricing, and operations without turning property management into a second full-time job.

Why your vacation rental must be active, not passive

One of the most important rules under OBBA is that the vacation rental cannot be passive. Long-term rentals generally fall into the passive category, which limits how losses and depreciation can be used.

To qualify, the property must be operated as an active short-term rental business.

In simple terms, you need to be materially involved. That usually means two things: you work more on the property than anyone else, and you spend a meaningful amount of time managing it. A common benchmark is around 100 hours per year, which roughly breaks down to a couple of hours a week and is often easier to reach than people expect.

Activities that typically count include answering guest messages, coordinating cleanings and maintenance, managing pricing, updating listings, and setting up or improving the property. Even sourcing the property and handling bookings can count toward active participation.

This requirement is a major reason vacation rentals are so different from long-term rentals. For W-2 earners who couldn’t previously use real estate depreciation, this active model can be a game-changer.

What is the 7-day rule for short-term rentals?

The 7-day rule refers to the average length of guest stays. If the average stay is seven days or less, the property may be treated differently than a traditional long-term rental for tax purposes.

Short stays like weekend getaways, three- to five-day trips, and weekly vacations help classify the property as a short-term rental. Combined with active participation, this classification is what allows many owners to unlock OBBA depreciation benefits.

The rule isn’t about avoiding longer bookings entirely. It’s about the overall average across the year. Maintaining that average is part of staying compliant.

How to qualify for OBBA benefits in 2025–2026

Qualifying isn’t automatic. It requires intentional setup and consistent involvement.

The first step is choosing the right market. Vacation destinations with strong short-term demand make it easier to maintain frequent, shorter stays. Next, the property must be set up as a true vacation rental: fully furnished, professionally presented, and listed on major booking platforms or a direct booking site.

It’s also essential to check local short-term rental rules before buying, since some cities like NYC place strict limits or bans on vacation rentals, which can affect whether the property can be operated legally.

Tracking your time is critical. A simple log of hours spent on guest communication, maintenance coordination, pricing, and listing management can make a big difference if your activity is ever questioned.

OBBA vacation rental qualification checklist

Using a platform like Hostaway can help centralize guest communication, calendars, and listings while still clearly documenting your involvement in daily operations.

Frequently asked questions about OBBA depreciation

Is 2025 a good year to buy a vacation home?

For many buyers, yes. OBBA makes 2025 and potentially 2026 especially attractive due to enhanced first-year depreciation opportunities.

What is OBBA and how does it affect vacation rental depreciation?

OBBA changes how quickly depreciation can be claimed, allowing qualifying vacation rental owners to take more in the first year.

Can I use vacation rental depreciation to offset my W-2 income?

In some cases, yes, if the rental qualifies as active and meets short-term stay requirements. Always confirm with a tax professional.

Do I have to manage the property myself to qualify as active?

You don’t have to do everything, but you must work more than anyone else involved and stay materially engaged.

How many hours do I need to work on my vacation rental?

Around 100 hours per year is often used as a practical benchmark, though requirements can vary.

Will these tax benefits still be available in 2026?

Current rules suggest they may continue into 2026, but tax laws can change. Planning sooner rather than later is wise.

Why Now Is the Time to Act

OBBA has created a narrow window where buying a vacation home can deliver both lifestyle and financial benefits. Significant first-year tax savings, a property you can enjoy, and the potential for long-term real estate growth make this an opportunity worth serious consideration.

That said, this isn’t about rushing into a purchase. The smartest next steps are practical ones: speak with a CPA and lender, research vacation rental markets, and run the numbers carefully.

2025 may not last forever. For buyers who plan carefully, it could be the right moment to act. If you decide to move forward, having the right operational systems in place from day one matters. Tools like Hostaway can help vacation rental owners stay organized, involved, and compliant while managing bookings across channels.