STR Rule Changes Surfacing
Several short‑term rental rule shifts were flagged: a social post reports Indiana’s legislature passed a 91–3 vote blocking local caps, and another post says Kentucky’s SB9 invalidated Lexington’s short‑term rental rules ( ). Tax‑adjacent guidance also circulated—one post noted bonus‑depreciation eligibility may require a 7‑day average stay and that the property be placed 'in service' this year to qualify (x.com).
Statehouses in Indiana and Kentucky are moving to limit how much cities can control short-term rentals, while federal tax rules are shaping how owners time purchases and deductions. (iga.in.gov, apps.legislature.ky.gov, irs.gov) In Indiana, a 2025 law already bars local governments from prohibiting short-term rentals and requires zoning ordinances to spell out standards for approvals and denials. The Indiana General Assembly site shows Senate Bill 411 as enrolled in 2025, with language focused on local zoning treatment of short-term rental properties. (iga.in.gov) In Kentucky, Senate Bill 9 was still moving through the legislature as of April 1, 2026, when it was posted for concurrence in the House committee substitute and an amendment. The bill’s official summary is about housing districts and local development incentives, not short-term rentals. (apps.legislature.ky.gov) Lexington, meanwhile, still had its short-term rental rules posted on its city website this week. The page says the Urban County Council adopted the regulations on July 11, 2023, defines rentals of less than 30 consecutive days, and says 2026 renewals are available through the city portal. (lexingtonky.gov) Those two states sit inside a wider fight over who sets the rules for vacation rentals: city halls that write zoning codes, or state legislatures that can override them. Indiana’s 2025 law and Lexington’s still-active local registration system show both sides of that split in real time. (iga.in.gov, lexingtonky.gov) The tax piece is separate from zoning, but it is landing at the same moment for owners and investors. Internal Revenue Service Publication 946 says bonus depreciation for many assets placed in service after December 31, 2024 and before January 1, 2026 is 40 percent, while property acquired and placed in service after January 19, 2025 can qualify for 100 percent under a later law change. (irs.gov) The widely cited “seven-day” rule comes from passive-activity rules, not from the bonus-depreciation rules themselves. Internal Revenue Service Publication 925 says an activity is not treated as a rental activity if the average period of customer use is seven days or less, and an Internal Revenue Service chief counsel memorandum applies that rule to a vacation property with an average stay of seven days. (irs.gov, irs.gov) That distinction matters because owners often combine several tax concepts in one strategy: average guest stay, material participation, cost segregation, and bonus depreciation. The Internal Revenue Service bonus-depreciation guidance says qualified property must be of a specified type, acquired after the statutory date, and placed in service within the required time period. (irs.gov, irs.gov) Indiana’s next chapter is implementation by counties and cities under the 2025 statute, while Kentucky’s immediate question is whether Senate Bill 9 changes before final passage. For short-term rental operators, the rules that matter now are still the ones in the enacted state laws, the live local ordinances, and the Internal Revenue Service publications governing the tax year at hand. (iga.in.gov, apps.legislature.ky.gov, lexingtonky.gov, irs.gov)
