Rental Property Investor · San Diego, CA · Member since 2018 · 13 posts · 3 votes
I've owned a vacation rental for about a year and a half now and it has been operating full time as a vacation rental but I want to maintain a steady income stream by renting it out for medium terms stays (3-4 months out of the year) in order to compensate for seasonality. Does anyone know if your home's tax classification would change or if any of the tax benefits that STR's receive would be diminished or negated if the home did earn another type of rental income throughout the year in addition to income as a STR?
We do not know your situation and what benefits you have been entitled to up to this point. I'll have to assume that you satisfied the material participation test and hence were able to take losses from this property against your non-real-estate income. Maybe cost segregation losses.
If you start renting your property for longer periods, it might lose its STR classification which depends on your annual average stay across the entire year. You cannot partition the year into an STR period and an MTR period. It's either an STR for the entire year or not.
However, it may not even be a concern if you no longer expect losses for this property - which is a common scenario.
As you know, only your own tax advisor can give you advice specific to your situation. Everyone's situation is different, and general principles are not really helpful.
Is the threshold for "annual average stay" across the year 14 days in order to maintain STR classification? I believe I read that on the IRS site but may be wrong on that.
Thank you for your response. It was helpful in clearing up my understanding of how that particular situation is viewed from a tax perspective.
Is the threshold for "annual average stay" across the year 14 days in order to maintain STR classification? I believe I read that on the IRS site but may be wrong on that.