STR Tax strategies for Primary Residences

Tax, SDIRAs & Cost Segregation
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STR Tax strategies for Primary Residences

Ashley James
Member since 2024 · 10 posts · 2 votes

Hello all, we are very green in understanding tax strategies for STRs and we're trying to understand how/what STR tax deductions can be captured for primary residences.

Below I have posed a scenario to use as an example. Can you all provide your thoughts?

Scenario: If one is to buy a new home to use as a primary residence ( till say Jan 1 2025), fix it up and get it ready for STR use starting Jan 2025 while STRing the initial primary until Jan 1, 2025, then move back to the initial primary and fulltime STR the new property.. Can one take advantage of the tax deductions associated with rehab, appliances, furnishings, STR set up costs, etc) that were required to get the new property STR ready in Tax year 2025? Can one take depreciation from the income generated from the inirtial primary in tax year 2024?

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  • Josh GreenBusiness Member
    Realtor · Tampa/St Pete/Clearwater/Bradenton · Member since 2020 · 396 posts · 353 votes
    2y
    Quote from @Ashley James:

    Hello all, we are very green in understanding tax strategies for STRs and we're trying to understand how/what STR tax deductions can be captured for primary residences.

    Below I have posed a scenario to use as an example. Can you all provide your thoughts?

    Scenario: If one is to buy a new home to use as a primary residence ( till say Jan 1 2025), fix it up and get it ready for STR use starting Jan 2025 while STRing the initial primary until Jan 1, 2025, then move back to the initial primary and fulltime STR the new property.. Can one take advantage of the tax deductions associated with rehab, appliances, furnishings, STR set up costs, etc) that were required to get the new property STR ready in Tax year 2025? Can one take depreciation from the income generated from the inirtial primary in tax year 2024?

    This is a good question and one I would recommend speaking to an STR knowledgeable licensed tax advisor on. 

    My question is why you’re buying it as a primary in the first place if you just are planning to move right back into your current primary?  (Mortgage fraud…?)

    A potential issue I will point out is that I’m pretty sure you need to put into service the property in the year you purchased it, at least for bonus depreciation.  If that is the case, then the new property bought in 2024 and launched in 2025 wouldn’t qualify for accelerated depreciation on those grounds alone. As for your other original primary, if that wasn’t bought in 2024, then again it wouldn’t qualify. 

    Now, other tax incentives like simple business write offs for expenses to set up the properties as an STR that’s most likely still something you can write off against your rental income gains. As for writing it off on active income, you’d still need to qualify as a REP (or spouse) or have material participation.  That is my guess, but I am not a tax professional so do consult your CPA as this is just my opinion/guess.
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  • Ashley James
    OP
    Member since 2024 · 10 posts · 2 votes
    2y

    Thanks, Josh! This is helpful as we were wondering about bonus/accelerated depreciation in this scenario.

    Also, good point about the mortgage. I was digging more for the tax strategies aspect but you make a good call out. The second property would need to be under a loan product other than a primary conventional.

    Appreciate it!

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    Your post is too hard to comprehend.

    You are better off saying Property ABC and Property DEF to distinguish your properties.

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