STR loophole for AirBnb

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STR loophole for AirBnb

Matthew KaukPro Member
Member since 2019 · 9 posts · 3 votes

I have an Airbnb that I bought in August of 2023.

Starting in January of 2024. I began to track my hours and where those hours went.

My understanding is that I can use the STR loophole to reduce my wife's taxable income. If I reach 100 hours and more then anyone else for the property.

1. Is there anything else I need to do to be able to take that reduction for my wife?

2. If I add another property do I need to track this property separately or can I track them cumulatively?


Thanks all.

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
2y

Can you even use your tracked hours against your wife's income?

I have no idea, but this doesn't sound right.

This is in the tax code not a loophole.

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    2y

    Can you even use your tracked hours against your wife's income?

    I have no idea, but this doesn't sound right.

    This is in the tax code not a loophole.

    1Reply
  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    2y

    For some reason I think I heard somewhere, a spouse can apply the hours spent on a STR towards the other spouse's income. But I would consult with a CPA that specializes in STR. I know if you dig around on Toby Mathis YouTube channel, he has some good info on STR and taxes.

    [email protected]330-557-3021
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  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    2y

    Its the tax code, regs, law etc. Not a loophole. My mandatory post about it....

    Thanks @John Underwood

    1Reply
  • Kelly O'Keefe
    Accountant · NC · Member since 2023 · 123 posts · 163 votes
    2y
    Quote from @Matthew Kauk:

    I have an Airbnb that I bought in August of 2023.

    Starting in January of 2024. I began to track my hours and where those hours went.

    My understanding is that I can use the STR loophole to reduce my wife's taxable income. If I reach 100 hours and more then anyone else for the property.

    1. Is there anything else I need to do to be able to take that reduction for my wife?

    2. If I add another property do I need to track this property separately or can I track them cumulatively?


    Thanks all.

    Hi @Matthew Kauk

    The basics seem to be there. I would make sure you are tracking your hours correctly and all of the activities you are tracking count. In general, the 100 hours tends to be the easiest to achieve but if you have 101 hours tracked and the IRS discredits 2, now you cannot offset the W-2 as planned. I would be cautious of investor hours such as research and education as these can get some investors. 

    The other property can be tracked cumulatively if it is also a STR. If it is a LTR then these properties will be tracked separately.

    If you file jointly then a spouse's material participation should count. 

    The STR Loophole can be complicated and is difficult to summarize in a single short post. As a result I can't answer if there is anything else you are missing. If you are planning to offset a large amount it may be beneficial to speak with a tax pro to ensure your strategy will work.

    1Reply
  • Zach Edelman
    Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
    2y

    There are CPAs focused for/on STRs. I would reach out to @learnlikeacpa on social media, Ryan Bakke, who can definitely assist with this. 

    0Reply
  • John Malone
    Attorney · Boston, MA · Member since 2023 · 140 posts · 75 votes
    2y

    @Matthew Kauk I would suggest reading some of the in-depth forms in blogs on this topic, as it comes up quite a bit. Having executed this strategy, nearly 100 time with our clients there is more than meets the eye, and there is an audit risk which we have seen. Here is a good forum: https://www.biggerpockets.com/forums/530/topics/1056436-clearing-up-confusion-on-tax-treatment-of-short-term-rentals

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    You can not 'group' the hours if you buy another property.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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  • Matthew KaukPro Member
    OP
    Member since 2019 · 9 posts · 3 votes
    2y

    @Kelly O'Keefe Thanks for the help. I'll follow up with my CPA. I agree that it seems the basics are there.

    0Reply
  • Jennifer B.
    Rental Property Investor · Marysville, WA · Member since 2010 · 46 posts · 40 votes
    6mo

    Good that you're already tracking, most people don't start until tax time and then scramble.

    On your wife's income: As long as you file jointly, your non-passive STR losses offset your combined taxable income. No special election needed, it just flows through on your joint return. The key is that YOU meet material participation (spouses' hours count together for the tests) and the property qualifies under the 7-day average rule.

    On multiple properties: Each property is tested separately by default. So property #2 needs its own 100 hours where no single person exceeds you. Track them separately.

    There IS a grouping election under Reg 1.469-4 that lets you combine properties into one activity, but it has tradeoffs and isn't always the right move. Talk to your CPA before making that election because it's sticky once you do.

    Since you're already logging hours, make sure you're also tracking your cleaners' and contractors' hours per property, that's the part of the 100-hour test people forget. I use STR Loophole (strhours.com) for mine, keeps everything separated by property and tracks against the tests automatically. Worth looking at especially if you're adding a second property.

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  • Crystal Ball
    Real Estate Consultant · Panama City Beach · Member since 2019 · 58 posts · 51 votes
    6mo

    My real estate tax strategist is genius in this. I saved hundreds of thousands of dollars with his advice. He has a website with a lot of free info or join his FB groups. Chris Piccurrio:  www.teachingtaxflow.com 

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