Deducting expenses before purchasing first STR loophole property

[Rory Berger]

Hi - I am a W2 earner with medium to high income and currently have limited savings. I expect to have better liquidity and roughly $100k to invest sometime in the next 9-18 months. My goal is to purchase a turnkey STR property, manage it for at least 100 hours in the first year, and use depreciation to meaningfully offset my W2 income while hopefully also generating cash flow and property value appreciation over time. My question is: between now and when I make that first investment, is there a limit or tax traps to watch out for in deducting expenses as I set up my entity structure, pay for software tools and research materials, and (most notably) travel to markets to do market research, meet with realtors, look at properties, etc.? I have heard various and conflicting things about the rules for business travel: does it need to be 100% business, at least 50%, or any percent? Do you allocate expenses between business and personal or is there a threshold where you can write off the whole trip? Does it matter if you travel on weekdays vs weekends? If I am working in partnership with my wife, what if one of us works a different % than the other on a given trip? Also, should I be tracking all these hours for the STR active management 100 hours or does that only apply after purchasing the first property?

[Sean Graham]

Quote from @Rory Berger:

Hi - I am a W2 earner with medium to high income and currently have limited savings. I expect to have better liquidity and roughly $100k to invest sometime in the next 9-18 months. My goal is to purchase a turnkey STR property, manage it for at least 100 hours in the first year, and use depreciation to meaningfully offset my W2 income while hopefully also generating cash flow and property value appreciation over time. My question is: between now and when I make that first investment, is there a limit or tax traps to watch out for in deducting expenses as I set up my entity structure, pay for software tools and research materials, and (most notably) travel to markets to do market research, meet with realtors, look at properties, etc.? I have heard various and conflicting things about the rules for business travel: does it need to be 100% business, at least 50%, or any percent? Do you allocate expenses between business and personal or is there a threshold where you can write off the whole trip? Does it matter if you travel on weekdays vs weekends? If I am working in partnership with my wife, what if one of us works a different % than the other on a given trip? Also, should I be tracking all these hours for the STR active management 100 hours or does that only apply after purchasing the first property?

@Ben Trageser any thoughts here?