Do I need to self manage to bonus depreciate ?
Rental Property Investor · Hartford, CT · Member since 2017 · 168 posts · 163 votes
Do I need to self manage to bonus depreciate ?
Most Popular Reply
Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votesQuote from @Heidi Kenefick:
I’m purchasing my first Airbnb that isn’t local to me. I plan to cost segregate and bonus depreciate it, as I did with the ones that are local to me. Given that this property is 300 miles away- I’ve considered using a property manager or co host. If I do that, can I still utilize the short term rental loop hole?
I ask because last year when I categorized my expenses I listed fees for hospitable as a management fee and my CPA told me I cannot have management fees if I am doing the STR loop hole.
The answer is, as usual, "it depends."
Read this post's Myth 4: https://www.biggerpockets.com/forums/51/topics/1122635-the-s...
It is more difficult to pass the material participation test when you use a management company, but it is possible. Your CPA should guide you through the requirements of material participation.
18 Replies
- 1yMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
Quote from @Heidi Kenefick:
I’m purchasing my first Airbnb that isn’t local to me. I plan to cost segregate and bonus depreciate it, as I did with the ones that are local to me. Given that this property is 300 miles away- I’ve considered using a property manager or co host. If I do that, can I still utilize the short term rental loop hole?
I ask because last year when I categorized my expenses I listed fees for hospitable as a management fee and my CPA told me I cannot have management fees if I am doing the STR loop hole.
The answer is, as usual, "it depends."
Read this post's Myth 4: https://www.biggerpockets.com/forums/51/topics/1122635-the-s...It is more difficult to pass the material participation test when you use a management company, but it is possible. Your CPA should guide you through the requirements of material participation.
- Rental Property Investor · Hartford, CT · Member since 2017 · 168 posts · 163 votes1y
@Michael Plaks thanks for your reply, that’s a good article.
I will still pass material participation for my STR's based on the number of hours I put in for my other STR properties. The law doesn't say it has to be 100 hours per property…. Just 100 in total. Plus more than anyone else. It sounds like a co-host would still be allowable so long as I work more than them!
- 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votesThe law does require participation in each rental to meet the material participation requirements. Alternatively, you can make a grouping election across multiple properties, but this won't work for everyone and there are some potential downsides to grouping.
Quote from @Heidi Kenefick:
@Michael Plaks thanks for your reply, that’s a good article.
I will still pass material participation for my STR's based on the number of hours I put in for my other STR properties. The law doesn't say it has to be 100 hours per property…. Just 100 in total. Plus more than anyone else. It sounds like a co-host would still be allowable so long as I work more than them!
.
.
.*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
- 1yMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
Quote from @Heidi Kenefick:
@Michael Plaks thanks for your reply, that’s a good article.
I will still pass material participation for my STR's based on the number of hours I put in for my other STR properties. The law doesn't say it has to be 100 hours per property…. Just 100 in total. Plus more than anyone else. It sounds like a co-host would still be allowable so long as I work more than them!
Yes, you may be able to make a grouping election to combine multiple STRs into a single activity. Then indeed you will need to pass the material participation test for the combined STR activity and not by property.
Such an election a not a no-brainer, it has nuances. Since you use a CPA, it's their job to guide you through these details. - Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes1y
Quote from @Sean O'Keefe:
The law does require participation in each rental to meet the material participation requirements. Alternatively, you can make a grouping election across multiple properties, but this won't work for everyone and there are some potential downsides to grouping.Quote from @Heidi Kenefick:
@Michael Plaks thanks for your reply, that’s a good article.
I will still pass material participation for my STR's based on the number of hours I put in for my other STR properties. The law doesn't say it has to be 100 hours per property…. Just 100 in total. Plus more than anyone else. It sounds like a co-host would still be allowable so long as I work more than them!
.
.
.*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
Again, the material participation looks at the activity. Default is a rental is the activity. But you can group STRs based on Reg.1.469-4. Also note that is different from the grouping in Reg. 1.469-9.
- 1yNick VogelPro MemberAccountant · Milwaukee, WI · Member since 2022 · 10 posts · 5 votes
For the STR Loophole, the IRS evaluates material participation on a property-by-property basis. This means that only the hours you personally spend on activities related to a specific short-term rental property count toward the 100-hour material participation requirement for that property. Hours spent managing or overseeing other properties cannot be aggregated to meet this threshold for the STR Loophole. As a result, it can be quite challenging to satisfy the material participation tests if you utilize a property management company and reside out of state. However, it may still be possible to meet these requirements under certain circumstances.
- Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes1y
Quote from @Nick Vogel:
For the STR Loophole, the IRS evaluates material participation on a property-by-property basis. This means that only the hours you personally spend on activities related to a specific short-term rental property count toward the 100-hour material participation requirement for that property. Hours spent managing or overseeing other properties cannot be aggregated to meet this threshold for the STR Loophole. As a result, it can be quite challenging to satisfy the material participation tests if you utilize a property management company and reside out of state. However, it may still be possible to meet these requirements under certain circumstances.
This isn't true. The material participation looks at the activity. A single STR could be the activity. Or someone might group several STRs together based on reg. 1.469-4. E.g., all the STRs might be the activity. The STRs in a particular location might be the activity, etc.
- Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes1y
Quote from @Heidi Kenefick:
I’m purchasing my first Airbnb that isn’t local to me. I plan to cost segregate and bonus depreciate it, as I did with the ones that are local to me. Given that this property is 300 miles away- I’ve considered using a property manager or co host. If I do that, can I still utilize the short term rental loop hole?
I ask because last year when I categorized my expenses I listed fees for hospitable as a management fee and my CPA told me I cannot have management fees if I am doing the STR loop hole.
Thoughts?
This is really a question about the interplay of the Reg. 1.469-4 (activity) grouping rules and the Reg. 1.469-5T (activity) material participation rules. And whoever answers your question needs to understand both parts of the passive loss limitation rules pretty well.
A first question is whether you've already grouped your individual STRs in one or more groups and how that grouping election impacts new property. If you' haven't already grouped them, you'll need to figure out whether you can do a grouping now. That may not be possible. You may be too late. (A decision not to do a 1.469-4 grouping is a grouping election. This BTW differs then from the 1.469-9 grouping election used commonly for REPS and can be made late.)
The next question is whether you materially participate in the activity that includes the new nonlocal STR. That material participation will be trickier if you have a local property manager because that means you can't count your property management hours in the activity. (Note that activity may be just that STR or all the STRs you've grouped into a single activity as per Reg.1.469-4.) And that material participation will be tricker because how easily can you spend time if the new STR is 300 miles away.
- 1yAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
@Heidi Kenefick Great question and you're right to clarify this before structuring your Airbnb and tax strategy. Here's the concise breakdown:
Yes, you can still use the STR loophole and take bonus depreciation but only if you meet the material participation rules, which are the key to unlocking active losses to offset W-2 or other non-passive income.
Here’s what matters:
- Material participation is what counts, not self-management alone. You don't have to do 100% of everything, but you must materially participate in the rental activity to qualify for the STR loophole (i.e., have the STR treated as a non-passive business activity).
- The most common test STR investors use is the 100-hour test (Test #2):
→ You must spend at least 100 hours on the property and more time than anyone else, including a property manager, co-host, or cleaner.
So, if a PM or co-host is logging more hours than you, you may lose eligibility. This is why your CPA flagged the "management fees" as a red flag—those could imply someone else is materially participating.
To still qualify while outsourcing some work:
- Be highly involved in decision-making, pricing, guest communications, and setup—track your hours.
- Avoid hiring someone who logs more total hours than you on that property.
- You can use support tools like Hospitable, as long as they don’t replace your involvement in core operational hours.
Tax Tip:
If you do meet the participation requirement, you can:
- Use cost segregation to identify assets with shorter lives (5, 7, or 15 years).
- Claim bonus depreciation (40% in 2025 unless reinstated to 100%) in year one.
- Offset your active W-2 income, if the STR loophole applies.
Let us know if you want a downloadable STR Loophole and Bonus Depreciation Checklist to help you track hours and structure this properly!
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.
INVESTOR FRIENDLY CPA®5241 Reviews - 1yBasit SiddiqiBusiness MemberAccountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
You don't need to self-manage to take advantage of bonus depreciation. However you may need to self-manage to take advantage of REPS or STR loophole which will allow you to take rental losses against other forms of income such as wages, interest, dividends, etc.
Basit Siddiqi CPA4.979 Reviews - 1yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 900 votes
No, you do not necessarily need to self-manage to qualify for bonus depreciation via the short-term rental (STR) loophole, but you must meet the IRS’s material participation rules.
If you hire a property manager or co-host, it becomes much harder to prove that you materially participated. To qualify:
- You must work at least 100 hours per year, more than anyone else (including the manager or co-host), or
- You must work at least 500 hours on the property yourself.
If the co-host or manager logs more hours than you, you won’t qualify, and your STR losses may become passive (not usable against W-2 income).
So yes, hiring management makes it harder—but not impossible. Just be cautious: using a manager usually disqualifies you unless you’re still the primary person running the property and can prove it with documented hours.
Malabute & Company CPAs525 Reviews - Specialist · Sarasota, FL · Member since 2024 · 33 posts · 8 votes1y
@Heidi Kenefick I recommend getting a estimate on a study and running it buy your CPA. Documenting your participation is going to be key if you are involved in an examination.
Brian Kiczula | CostSegRx
Cost Segregation SpecialistNote: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice.
- Accountant · United States · Member since 2023 · 5 posts · 2 votes1y
Heidi,
Yes, you can still use the STR loophole even if the property isn't local, and you use a property manager or a co-host. It depends on whether you materially participate.
The IRS doesn't disqualify you for having management fees. But, if someone else (like a co-host or manager) is doing most of the work, then they, not you, are materially participating. That would make your activity passive, and your bonus depreciation wouldn’t offset W-2 income.
So you don’t have to self-manage everything. But, you do need to:
- Spend 100+ hours on the property and
- Spend more time than anyone else, including your co-host or manager
- Rental Property Investor · Marysville, WA · Member since 2010 · 46 posts · 40 votes5mo
Your CPA's advice is a bit blunt but directionally right. It's not that you can't use a PM, it's that doing so makes the material participation test much harder to pass.
The 100-hour test requires that no single other individual exceeds your hours. A full-service PM managing your property 300 miles away is almost certainly logging more hours than you. That kills the test. A co-host or half-service PM where you're still handling guest communication, pricing, and decision-making is more workable but you need to actually track both your hours and theirs.
The Hospitable thing is a different issue. Hospitable is automation software, not a property manager. Categorizing it as a "management fee" is what spooked your CPA, it signals to the IRS that someone else is managing the property. Recategorize it as software/technology expense and that issue goes away.
For a property 300 miles away, the playbook is usually: use a cleaner (rotate multiple so no single one out-hours you), handle everything else yourself remotely, guest messaging, pricing, listing optimization, bookkeeping, vendor coordination. Remote self-management is very doable with the right tech stack.
Just be disciplined about logging hours from day one since a remote property with a big cost seg deduction is the profile that draws attention. I track mine with STR Loophole (strhours.com) keeps you honest on where you actually stand against the tests. If you can't meet 100 hours/more than anyone else, you could go for 500 hours (less than 10 hours/week).
- 5moHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
OP are you working a W2 job? How many hours per year? Do you have REPS status? I like to look at posters past posts before responding. At one time you were a pediatrician. That is why I ask about REPS status.
- 5moHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Quote from @Henry Clark:
OP are you working a W2 job? How many hours per year? Do you have REPS status? I like to look at posters past posts before responding. At one time you were a pediatrician. That is why I ask about REPS status.
A better question, are these properties STR/mtr/LTR that you are taking 1st year depreciation?
- Specialist · Tampa, FL · Member since 2026 · 10 posts · 8 votes5mo
Short answer: Yes — but only if you meet one of the material participation tests, and which test you can meet depends on how much the PM or co-host is actually doing.
Your CPA's statement ("can't have management fees and use the STR loophole") is oversimplified. The rule isn't about what's on your expense sheet. It's about hours.
The actual rule (IRC §469 / Reg §1.469-5T): you must meet ONE of 7 material participation tests. For STR hosts, two matter:
- Test 1: 500+ hours personally. Doesn't care if you have a PM.
- Test 3: 100+ hours AND more than any other individual (cleaner, co-host, PM, VA).
A full-service PM typically logs 200-400 hours/year per listing — hard to exceed remotely. That usually kills Test 3 and pushes you to Test 1 (500 hours), which is brutal from 300 miles away.
A co-host with limited scope (e.g., cleaning coordination only, or maintenance dispatch only) might only log 80-120 hours/year. You can beat that remotely by handling guest communication, pricing management, listing updates, bookkeeping, and vendor coordination yourself — realistically 150+ hours/year as an engaged owner.
On Hospitable specifically — your CPA is mis-categorizing it.
Hospitable is guest-messaging automation SOFTWARE, not a property manager. It's a SaaS subscription. It should be on your Schedule E as "Software / Subscriptions," not "Management Fees." Software doesn't count as "another individual's hours" for Test 3 purposes because it isn't an individual at all.
If your CPA thinks Hospitable disqualifies you from the STR loophole, they're conflating "software I pay for" with "hiring a person" — those are fundamentally different for material participation analysis. Worth pushing back on that specific point, or getting a second opinion from an STR-specialist
CPA.
Practical structure for a remote Airbnb:
1. Cleaners on per-turnover basis (capped hours, beatable)
2. Handyman on-call, project-based (usually low total hours — maybe 10-20/year)
3. Automation software (Hospitable, PriceLabs, OwnerRez, etc. — 0 "individual" hours)
4. YOU handle: guest comms, pricing, listing management, bookkeeping, vendor coordination
5. Track your hours contemporaneously — IRS rejects post-hoc reconstructions categorically
With this structure, 300 miles away is fine. The IRS cares about your hours relative to other individuals, not your zip code.
- 5moMalik JavedBusiness MemberSpecialist · Los Angeles California · Member since 2024 · 90 posts · 38 votes
@Heidi Kenefick You can still use the short term rental loophole with a remote property and even with a co-host or manager. The key is not whether you pay management fees. It is whether you materially participate.
That is where your CPA’s comment is coming from. If you hand everything over to a full service property manager who handles guest communication, pricing, and operations, it can look like they are running the business, not you. That would make your losses passive and eliminate the benefit.
But having help does not automatically disqualify you.
You are generally fine if you stay actively involved in things like guest messaging, pricing, and coordinating cleaners, and you put in enough hours, typically 100 or more and more than anyone else involved.
Where people run into issues is when they fully outsource and become hands off.Short answer, you can use a co-host or some support, just make sure you are still the one running the property and tracking your hours.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.