STR Tax Loophole 30 Day Rental

STR Tax Loophole 30 Day Rental

Member since 2025 · 1 post · 2 votes

Hello, I've been researching how to lower my tax burden and discovered RE Professional status which is being phased out. Hopefully Trump brings back the 100%. But there's also STR scenarios to qualify for active income deductions. I was reading the forum and everyone was mentioning renting for an average of 7 days or less but that's only one scenario and I believe it doesn't have to hit all the scenarios, just one.

Is anyone renting for 30 days and using the other scenarios to qualify for active STR Tax breaks?

AirDNA article for reference:

"The average guest stay is between 8 and 30 days, and you provide significant services – If guests stay more than seven days but less than 30, your rental may still be non-passive if you provide substantial services beyond basic maintenance. This includes things like:

Daily cleaning

Concierge services

Meals or room service

Other hotel-like amenities

You materially participate – You can still override the per se passive rule by proving that you actively manage the property. This requires meeting one of the IRS’s material participation tests, which we’ll cover shortly."

I want to have a clear plan for how to qualify for the STR Tax break before I invest and. Then get a cost segregation study and give that to an accountant.

Is anyone running 30 day rentals and what method do you use to qualify for active income status? Daily cleaning is an easy service to offer tenants. I'm wondering what else you can do that won't be too much of a hassle. And what records do you provide your accountant in case there's an audit? 

Thanks in advance!

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Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes
1y

@Scarlett G. Banks Just to be technical, what really happens with a motel or hotel, or some other real-estate-y business where there is significant personal services, is it's not considered a rental activity. And that means the only thing that matters in terms of passive vs. nonpassive is whether you or you and your spouse materially participate.

The regs say this about what significant personal services are:

(iv) Significant personal services—(A) In general. For purposes of paragraph (e)(3)(ii)(B) of this section, personal services include only services performed by individuals, and do not include excluded services (within the meaning of paragraph (e)(3)(iv)(B) of this section). In determining whether personal services provided in connection with making property available for use by customers are significant, all of the relevant facts and circumstances shall be taken into account. Relevant facts and circumstances include the frequency with which such services are provided, the type and amount of labor required to perform such services, and the value of such services relative to the amount charged for the use of the property.


But frankly? This doesn't really seem like a real estate investment. You're running some other trade or business.

BTW the other thing I'll mention is, I don't think the Section 469(c)(7) rule (aka "real estate professional") is being phased out. That's in the statute. Congress can change the law. But I don't think there's any serious move to do that.

See this reply in the discussion

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  • Julio GonzalezPro Member
    Specialist · West Palm Beach, FL · Member since 2008 · 4k+ posts · 1k+ votes
    1y

    The IRS lists six exceptions, two of which you already mentioned. The others include:

    - Extraordinary personal services provided, regardless of customer use duration.

    - Rental incidental to a non-rental activity.

    - Property available during defined business hours for nonexclusive use by various customers.

    - Property used in an activity conducted by a partnership, S corporation, or joint venture in which the taxpayer holds an interest.

  • Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes
    1y

    @Scarlett G. Banks Just to be technical, what really happens with a motel or hotel, or some other real-estate-y business where there is significant personal services, is it's not considered a rental activity. And that means the only thing that matters in terms of passive vs. nonpassive is whether you or you and your spouse materially participate.

    The regs say this about what significant personal services are:

    (iv) Significant personal services—(A) In general. For purposes of paragraph (e)(3)(ii)(B) of this section, personal services include only services performed by individuals, and do not include excluded services (within the meaning of paragraph (e)(3)(iv)(B) of this section). In determining whether personal services provided in connection with making property available for use by customers are significant, all of the relevant facts and circumstances shall be taken into account. Relevant facts and circumstances include the frequency with which such services are provided, the type and amount of labor required to perform such services, and the value of such services relative to the amount charged for the use of the property.


    But frankly? This doesn't really seem like a real estate investment. You're running some other trade or business.

    BTW the other thing I'll mention is, I don't think the Section 469(c)(7) rule (aka "real estate professional") is being phased out. That's in the statute. Congress can change the law. But I don't think there's any serious move to do that.

  • Jason MalabuteBusiness Member
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 901 votes
    1y

    When you’re dealing with a motel, hotel, or similar property, the IRS generally doesn’t treat it as a rental activity if there are substantial personal services involved. In those cases, the real question isn’t about passive vs. nonpassive income—it’s about whether you (or your spouse) are materially participating in the business.

    The IRS rules define “significant personal services” as services provided directly by people (not things like utilities or property itself). When deciding whether those services are significant, the IRS looks at factors like:

    • how often and consistently the services are provided,

    • the kind and amount of labor required,

    • and the value of those services compared to the rent charged.

    So in plain terms: if the personal services you provide to customers are substantial, then this doesn’t really count as a traditional real estate investment. Instead, it’s considered another type of business.

    One last note: Section 469(c)(7)—the “real estate professional” rule—doesn’t really apply here. That’s just how the law is written. Congress could change it someday, but as of now, there’s no practical way around it.

    Malabute & Company CPAs525 Reviews
  • Dr · VA · Member since 2025 · 154 posts · 34 votes
    1y

    1. less then 7 days, STR

    2. less then 14 days, without requirement to declare

    3. active participation in the management of STR

    4. Qualifies for "non-passive income" and qualifies losses towards your active incomes

    5. if in high income bracket, can do Cost Seg

  • Jason MalabuteBusiness Member
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 901 votes
    1y

    Scarlett, to put it simply, if you’re running something like a hotel, motel, or similar business where you provide substantial personal services, the IRS doesn’t see that as a rental activity. In those cases, what matters for tax purposes isn’t whether it’s passive or non-passive income, but whether you or your spouse are materially involved. The regs define “significant personal services” as things like frequent cleaning, concierge-type help, or other services that go beyond just letting someone use the property. In practice, that looks less like real estate investing and more like operating another kind of trade or business. Also, the “real estate professional” rule under Section 469 isn’t going away unless Congress changes the law, and there’s no sign they will anytime soon.

    Malabute & Company CPAs525 Reviews
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