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Tax implications of using one unit in a multifamily property as a STR
Looked extensively online and on the BP forums and could not find a clear answer for our particular situation. Would appreciate any insights from people who understand this stuff. FWIW, I did email my CPA to ask about this but he has been on paternity leave and I have not heard back. :)
My question is whether using 1 unit in a multifamily property as a STR would allow for the expenses for that unit, as well as a portion of the total depreciation for the property, to be applied toward the so-called "STR loophole" to offset my W2 income, assuming I meet material participation criteria for the STR.
If this is a valid strategy, my next question is whether a cost segregation study can allocate bonus depreciation to specific units, or if depreciation can only apply to the property as a whole. If it's not clear what I am asking, please let me know and I will try to clarify.
Here's additional info about our situation.
Operators: 2 member LLC. I am a W2 earner and my partner is a REP (broker and investor). My wife is a REP (broker) but is not a member of the LLC and is not involved in managing the properties.
Property: 4 unit multifamily property purchased in Feb 2025. At the time of purchase, 1 unit was vacant and 3 units were occupied by long term tenants.
Renovations: We did a new roof and electrical upgrade for entire property. The vacant unit was renovated for ~$30k including central HVAC installation and was placed into service as a STR in Sep 2025. It was never leased to a long term tenant. 2 of the 3 other units turned over during the year and were renovated for a total of ~$10k each, and placed back into service as LTR's.
Time spent: I spent >100 hrs this year coordinating the purchase and renovation of the property as well as furnishing and preparing the STR unit to be placed into service (photos, online listings, etc). My partner spent <50 hours on these tasks this year.
Happy to provide any additional info if needed. Thanks in advance for any insights!