Every fall, the same question lands in my inbox: can I still buy a Sedona short-term rental this year and use it on my 2026 taxes? Often the answer is yes. But the clock is tighter than most investors expect, and one popular assumption is wrong.
Bonus depreciation is not expiring on December 31. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025, and IRS Notice 2026-11 laid out how that applies. If you buy in January instead, the rate is the same. What changes is which tax year the deduction lands in. Buy and place a property in service this year and it is a 2026 deduction. Miss the window and it moves to 2027.
So the real deadline is the calendar. Here is how I walk investors through it.
Four things that need to be true by December 31
These are the questions I ask every year-end buyer. Your CPA makes the final call on each one.
- You own it. Under contract is not enough. The sale has to close and record in 2026.
- It is placed in service. Under IRS Publication 527, rental property is generally in service when it is ready and available for rent, even if your first guest does not arrive until later. In practice that means furnished, supplied, permitted where required, and listed. A home that is still being renovated or set up on December 31 is a 2027 conversation.
- It qualifies as a short-term rental for tax purposes. The average guest stay needs to be 7 days or less. Most Sedona STRs sit well under that. I cover it in the material participation guide.
- You materially participate. For most of my buyers that means the 100-hour test: more than 100 hours and more than anyone else, including your cleaners and your property manager. This is where year-end buyers get caught, because the hours are measured over the tax year you own the property. If you close in mid-December, you have a few weeks, not twelve months. Ask your CPA whether any pre-closing work counts, and plan as if it does not. Keep a contemporaneous log of everything you do after closing: building the listing, guest messaging, coordinating cleaners, ordering supplies.
If you hand the keys to a full-service manager on day one, you may undo the whole point. Talk to your CPA about how your hours will work before you write an offer, not after.
Work backward from December 31
These are planning estimates, not promises. Your lender, the title company and the city set the real dates.
| When | What |
|---|---|
| Now through late October | CPA call to confirm the strategy fits your income and your hours. Lender pre-approval. Decide whether you want a turnkey, operating STR or a project. |
| Late October to early November | Tour properties and write offers. A financed purchase commonly takes 30 to 45 days to close, so this is the window for a mid-December closing. |
| Mid-November | Cash buyers can still go under contract and close in time. Financed buyers are at the edge of what is realistic. |
| By mid-December | Target closing. This leaves two weeks for furnishing, permit and tax license steps, a live listing, and your first logged hours. |
| December 15 to 31 | Place the property in service and start your hour log. Every day of slack here protects you. |
A closing on December 28 leaves no room for a lender delay, a title issue, or a permit question. If any one of those slips, the deduction can slip a full year.
The Sedona question to ask before you write an offer
Operating a short-term rental in Sedona requires a city permit, and you will also have a transaction privilege tax license for lodging tax. The City of Sedona started its permit program in January 2023, and permits are renewed annually. What I want every year-end buyer to find out before they commit is whether an existing permit carries over to a new owner at closing, or whether you apply fresh, and how long that takes. If your placed-in-service date depends on it, get the answer from the city in writing. I help clients ask the right questions during the offer period. My permit guide and lodging tax guide cover the basics.
If you are selling something to fund this purchase
Investors exchanging out of another property have an extra date to watch. A 1031 exchange gives you 45 days to identify replacement property and 180 days to close. But the 180 days ends early if your tax return is due first. If you sell a relinquished property after about October 17 this year, filing an extension (Form 4868) generally protects the full 180 days, and filing your return before the exchange closes can cut it short. Talk to your qualified intermediary and your CPA about the exact dates. My late-year 1031 timing guide has the exact 2026 dates, and my Sedona 1031 exchange guide explains how I work alongside them.
What this can look like in numbers
I am not going to promise you a savings number in a blog post, because it depends on your income, your bracket, the purchase price, how much a cost segregation study reclassifies, and whether you pass the tests above. What I can do is show you how the pieces fit. The bonus depreciation and cost segregation guides explain the mechanics, the tax savings estimator gives you a range to bring to your CPA, and the deal analyzer helps you test the investment itself, because a property has to make sense as a business, not just as a deduction.
Where my own listings fit
I operate Sedona short-term rentals myself, and three of my own are currently on the market: 30 Pony Soldier Circle, 65 Zane Grey Circle, and 25 Pony Soldier Road. Each is an operating, turn-key Sedona STR with a documented history. If you are working against a year-end timeline, I can walk you through what a transition would involve and how it would line up with your dates. I will tell you honestly if the calendar does not work.
Your year-end checklist
- Talk to your CPA about your income, the passive loss rules, and how your hours will work.
- Get lender pre-approval now, and ask for a realistic closing timeline in writing.
- Decide on turnkey versus a project. An operating, turn-key property can shorten the path to “ready and available for rent.”
- Ask the City of Sedona about the permit process for a new owner before you commit.
- Plan your first 100 hours and start a daily log the day you close.
- If you are selling, talk to your qualified intermediary and CPA about the 180-day date and an extension.
If you are thinking about buying before year-end, the next two weeks matter more than the last two. Book a 15-minute call and we will work out whether your timeline holds.
Disclaimer: William Hamburg is an Associate Broker with Realty ONE Group Mountain Desert in Sedona, Arizona. He is not a CPA or tax attorney. This article describes general information about federal tax rules as of its publication date, including the One Big Beautiful Bill Act and IRS Notice 2026-11, and is not tax, legal or investment advice. Tax outcomes depend on your individual facts, and rules can change. Confirm every item with your own CPA or tax advisor before making any purchase or filing decision.