Using the "STR Loophole" to Offset Your W-2 Income? Here's How.

[Brian Kiczula]

Hey BP family,

Frustrated that your real estate "paper losses" can't offset your W-2 income? They're usually stuck in a "passive" bucket.

Here's how the "STR Loophole" legally moves those losses to your "active" bucket to slash your tax bill. It boils down to 3 steps.

The 3-Step Playbook

1. The 7-Day Rule: Your average guest stay must be 7 days or less. This is key because it reclassifies your STR from a "rental" to a "business" in the eyes of the IRS.

2. Material Participation: You have to actively run the business. The most common test is:

• Spend >100 hours/year on the property.
• Spend more time than any other single person (like your cleaner).
• Pro Tip: Track your hours meticulously! This is your proof.

3. Cost Segregation Study: This is how you create a massive "paper loss" to use. A cost seg study accelerates your depreciation, generating a huge write-off in Year 1, especially with bonus depreciation.

The Result in a Nutshell

Imagine you earn $250k from your job. Your new STR, after a cost segregation study, generates a $150k loss.

By following these steps, that loss becomes "active," and you can potentially lower your taxable income from $250k to $100k. The tax savings can be massive (often $40k+).

Disclaimer: This is not tax advice! You absolutely need a savvy CPA who understands this specific STR strategy to do it right.

Has anyone here successfully used this method? Share your experience in the comments!