The One Big Beautiful Bill

The tax landscape for vacation rental owners is changing—again. The newly enacted “One Big Beautiful Bill” (OBBB) brings major changes—some beneficial, some less relevant depending on your situation. But this time, the “One Big Beautiful Bill” isn’t just shifting the goalposts; it’s rewriting parts of the playbook. If you own a second home (or are thinking about investing in one), you now face both stability and some powerful new options—if you know where to look.

We spoke with Daned Kirkham, Senior Director of Real Estate at Vacasa, to unpack the top three changes that impact vacation homeowners, who should care, and some practical realities to be aware of.

1. Mortgage interest deduction protected

What changed?

• The $750,000 mortgage interest deduction limit (enacted in 2018) was saved—it was set to expire after tax year 2025 but is now sticking around.
• Mortgage interest (and now, private mortgage insurance) on both primary and secondary (vacation) homes qualify.
• Interest on home equity loans is still not deductible if the loan isn’t used for home acquisition.

What this means for you

• “Stability might not sound exciting,” Daned said. But knowing rules won’t suddenly change is invaluable for long-range planning with confidence.”
• You’ll see the most impact if your vacation home carries a mortgage and you itemize; you can deduct interest (within the $750,000 combined limit for both homes).
• Already at your limit? The $750,000 limit applies to your combined mortgage debt (first and second homes). If your main home’s mortgage is already at this cap, you won’t get further advantage from a mortgage on your vacation home.
• Not everyone needs this deduction today, but it keeps options open. If you plan to renovate, upgrade, or refinance, it’s reassuring to know this deduction will be there.

2. 100% bonus depreciation is now back

What changed?

• You can now write off 100% of the cost of qualified property (including furniture, appliances, and even some improvements) in the year you place them into service.
• Previously, this benefit was scheduled to phase out and disappear after 2026; now, it’s back.

What this means for you

• Best for new owners: If you’ve just bought (or are buying soon), you can write off a stunning portion of your investment quickly—including furniture, appliances, even landscaping, and some renovations.
• Less impact for long-time owners: If you’ve owned for years, don’t expect miracles; there may not be much depreciation left to accelerate, Daned explains. Focus your attention on strategic upgrades—where bonus depreciation still works for newly added assets.
• Think like an investor, not a landlord: “Bonus depreciation isn’t just about lowering this year’s tax bill, “ Daned explains. “It’s an opportunity to shift more capital into your asset “today” instead of “tomorrow”.” For new buyers, this means structuring your investment to maximize this benefit, then revisiting annually as your asset mix (from decks to dishwashers) evolves.
• Depreciation recapture: If you sell the property and haven’t swapped it via a 1031 exchange, you’ll face a “recapture” tax on the depreciation taken, usually at a 25% rate. This is often lower than your personal tax rate, but it’s crucial to plan ahead for this potential bill.
• Cost segregation studies: Breaking out qualifying assets (through a professional cost segregation study) unlocks more bonus depreciation, but it does come with added costs—evaluate if the tax savings are worth it. Many casual owners overlook this tool, but it can mean thousands in extra deductions for some. “Skip the temptation to DIY this,” Daned said. “IRS scrutiny is only growing. If you’ve got a higher-value property, professional help could be a sound investment.”

3. SALT Deduction Cap increased temporarily

What changed?

• The state and local tax (SALT) deduction cap is temporarily raised from $10,000 to $40,000 (for incomes under $500,000) for tax years 2025-2029; the cap reverts to $10,000 starting in 2030.
• If your income is above $500,000, the deduction starts to phase out and is fully gone at $600,000 AGI.

Who benefits—and who doesn’t?

• Biggest winners: High-value property owners in states with steep taxes: California, New York, New Jersey, Connecticut. For a Lake Tahoe or Hamptons owner, this could mean $20,000–30,000 more in deductible taxes over the next few years.
• Low-tax states or average-value properties: If your total property and local taxes are still under $10,000, or you don’t itemize, you’ll see zero benefit. Many owners—especially in Florida and Texas—won’t gain anything here.
• Income limitation: If your household income exceeds $500,000, the benefit tapers quickly, and above $600,000, it vanishes. It’s a deliberate narrowing to benefit those feeling squeezed by high property taxes—not the highest earners.
• Strategic window: The increased cap is temporary—2025 through 2029—so plan to take full advantage. If you’re considering a high-value purchase in a high-tax area, doing it soon locks in bigger deductions for the next five years.
• Location, location, taxation: These changes may drive more buyers into “SALT-friendly” states or shift demand inside high-tax markets toward properties where the new cap truly matters.
  
  

With the new law, some owners will see more generous write-offs, while others will simply find peace of mind in tax law stability. Either way, knowing the details can help you maximize savings and confidently plan your vacation rental investment.