✅ STR Tax Loophole Passed & other real estate investor tax provisions

[AJ Wong]

Well..it is official - the so called ‘Big Beautiful Bill Act’ has cleared both the Senate and House and will have significant impacts on the real estate market and investors. The final version of the bill includes some major wins for real estate investors including:

• A permanent extension of lower individual tax rates
• An enhanced and permanent qualified business income deduction (Section 199A)
• A temporary (five-year) quadrupling of the state and local tax (SALT) deduction cap, beginning for 2025
• Protection for business SALT deductions and 1031 like-kind exchanges
• A permanent extension of the mortgage interest deduction

⚡️ What’s else is Back? The STR Loophole + 100% Bonus Depreciation means:

• If you buy a qualifying STR and materially participate, you can immediately write off a huge portion of the property’s cost in Year 1.
• These losses offset your W-2 income, unlike regular passive rental losses for qualified properties placed into service as of January 19th 2025.

🧮 Key Takeaway

- Without the loophole, you’d only offset passive income.
- With the loophole + 100% bonus depreciation, you offset active high W-2 income — slashing your tax bill in Year 1.

📌 Big Picture

• Who wins? High earners, self-managing STRs, 7 days or less average stays.
• Why act now? The 100% rate phases down after 2028 — lock in full write-offs while it lasts.
• Pro move: Pair with a legit cost seg study to maximize short-life asset reallocation.

Not a tax Pro - any further insight or examples are always welcome and appreciated. 

Happy to say we coincidentally entered contract on a riverfront cabin today :) 

Cheers. 

[John Underwood]

Not a loophole it is tax law.