Can I Deduct STR Expenses in Year Before Property is Listed?

Question

Hi everyone,

My wife and I formed an LLC in late 2024 for our short-term rental business, and we’ve been prepping a property that we plan to list in 2025. The business is legally formed, we’ve started organizing finances, and have been incurring expenses, but the property was not placed in service in 2024—it wasn’t available for rent yet.

My question is: Can we deduct any of our 2024 startup expenses on our 2024 tax return, or do we have to wait until the property is officially placed in service (i.e., listed and ready to receive guests)?

Some examples of 2024 expenses:

• • Startup and administrative costs: LLC formation
• • Property preparation: Furnishings, appliances, minor repairs, upgrades
• • Professional services: Consultations with CPAs, contractors
• • Tech and software: Website domain and hosting, Google Workspace, QuickBooks subscription

I’ve read IRS guidance on startup costs, but I’m still unclear what falls under it and how it applies when a rental hasn’t begun yet. Would love to hear how others have handled this or if you’ve seen clarity from your tax pros.

Thanks in advance!

Dylan Brown · Answer

Hi David,

Great question—and nice job getting a head start on organizing things!

Here’s the short version:
Even though you're cash basis, startup costs (like LLC formation, legal/admin setup, initial consultations, software, etc.) aren't deductible until the business is active—meaning the property is listed and ready for guests. So if that doesn’t happen until 2025, you’ll wait to deduct them on your 2025 return.

Once you're up and running, you can deduct up to $5,000 of those startup costs right away, and the rest get amortized over 15 years. These typically include:

• LLC formation & legal setup
• Initial marketing or software subscriptions
• Consultations with pros like CPAs or contractors
• Other admin costs before rentals start

LLC formation & legal setup

Initial marketing or software subscriptions

Consultations with pros like CPAs or contractors

Other admin costs before rentals start

Another win once the property is placed in service: you may be eligible for bonus depreciation if you do a cost segregation study. That could generate a large paper loss in year one (even if the property cash flows).

Quick question—are you planning to qualify for the STR loophole on this one? That can make those losses deductible against W-2 or other active income, which is huge.

I'm always just a chat away if you want to run through the numbers or make sure it's structured the right way. Feel free to reach out anytime.

Nathaniel Quesenberry · Answer

Generally you're not allowed to deduct expenses for a business until it actually starts. Any expense prior to that starting date is generally going to be a start up expense (there are exceptions, but those exceptions aren't allowed to be deducted/or have different rules).

Once the business starts (in this case your STR), you would be allowed up to a $5,000 deduction provided your total start up costs don't exceed $50,000 (if they do, the deduction is reduced).

Another point to note here, if you ever close this business prior to amortizing the start up costs entirely, you are allowed to take the remaining start up costs as a deduction on the last year that you have the business.

Jason Malabute · Answer

If you’re starting an Airbnb or short-term rental, you can’t deduct your startup costs—like LLC setup, legal fees, software, or consultations—until the property is actually available for rent. So if your place isn’t ready until 2025, you’ll have to wait until then to claim those costs on your taxes.

Once you’re active, you can immediately deduct up to $5,000 of startup costs (like legal setup, marketing, or consultations), and anything beyond that gets spread out over 15 years.

After your property is up and running, you might also qualify for bonus depreciation if you do a cost segregation study. That could mean a big tax deduction in year one—even if your rental makes money.

Lastly, he asks if you’re trying to qualify for the short-term rental (STR) loophole. If you do, and you meet the criteria, you could potentially deduct those losses against your regular income like W-2 wages, which is a huge benefit.

Ashish Acharya · Answer

@David Ruiz Since your STR property wasn't placed in service in 2024, most of the expenses you've incurred can't be deducted yet—but they're not lost. These costs are typically treated as startup expenses or capitalized into the property's basis, and become deductible once the property is officially available for rent in 2025.

Your LLC setup, software subscriptions, and CPA consults qualify as startup expenses. The IRS allows you to deduct up to $5,000 of startup costs in the year the business becomes active, with the rest amortized over 15 years. Items like furnishings, appliances, and upgrades will be capitalized and depreciated once the rental goes live.

Keep detailed records of all 2024 expenses, they’ll be valuable when the property is placed in service.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Can I Deduct STR Expenses in Year Before Property is Listed?

Can I Deduct STR Expenses in Year Before Property is Listed?

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