Spreadsheet calculate for custom STR loophole & cost seg analysis

[William C.]

Has anyone built a custom spread calculator with the intent of quickly analyzing deals for STR loophole & cost seg purposes? If yes, can you share? If no, can you help my brainstorm what one could look like?

My thoughts are:

Step 1: Input purchase price. Separate out land value v. structure value. Carrying just the structure value forward.

Step 2: Use an online estimator tool like KBKG to enter the details of the property. This will spit out out a bonus depreciation number. Carry that forward.

Step 3: Optional. If this an ADU property, calculate the square footage of the STR and compare that to the overall square footage of the purchase. Carry a portion forward.

Step 4: Custom part. Estimate taxable income for the year. Using STR loophole (if not REPS) how much would taxable income be reduced by? Estimating combined marginal tax rate (fed & state), get an estimate of overall tax dollars saved.

Output from this could help a person pass on properties that don't hit a personal threshold of benefit, or move forward with the ones that do. I realize this is an oversimplification. What feedback and edits do you have?

[Jason Malabute]

Hey William — this is a great initiative, but I strongly recommend working with a tax professional instead of trying to DIY a spreadsheet for something this nuanced. The STR loophole, cost segregation, and depreciation calculations involve a lot of moving parts and it's easy to either overestimate the benefits or miss compliance issues that could trigger an audit. A good CPA who specializes in real estate can model this accurately, factor in your personal tax profile, and make sure the strategy actually holds up if ever questioned.