The most expensive surprise in an STR sale usually isn't the buyer's negotiation — it's the tax bill. Sellers plan around capital gains and forget the other line: depreciation recapture. One caveat before anything else: this is education, not tax advice — the numbers below are illustrations, and you need a CPA who knows real estate running your actual figures before you list.
Every year you owned the STR, you deducted depreciation (or the IRS assumes you did — you owe recapture even on depreciation you never claimed). At sale, that deducted amount is taxed as recapture at up to 25%, on top of capital gains on the appreciation. Illustration: $150K of accumulated depreciation can mean roughly $37K of recapture tax before capital gains enter the math.
Cost seg front-loaded your depreciation — great for your early-year tax bills, but it means far more accumulated depreciation, and the accelerated portion can be recaptured at ordinary income rates rather than the 25% cap. The strategy that saved you five figures going in can cost five figures going out. This is the single most common exit surprise for STR owners, and it's exactly why the CPA conversation happens before pricing, not at closing.
Go deeper: The 1031 Exchange Guide and Cost Segregation for STRs.
ACTION: Book a CPA consult before you list. Bring your depreciation schedule and ask two questions: "What's my total tax on a sale at $X?" and "Does a 1031 make sense for me?"
Final lesson in 2 days: your complete closing checklist — and how to get the sale done right.