Feedback on 2025 STR loophole execution

Feedback on 2025 STR loophole execution

Member since 2018 · 5 posts · 3 votes

Hey everyone. Our household makes about $500K per year. Obviously, we

are paying a lot of tax, but we have never seriously thought about

reducing the tax that we are paying. However, for the first time, I

started looking into it about a month ago and I found that there's a

thing called short-term tax strategies—not really a loophole, but that's

what people call it. This involves buying a property, let's say a

property of $1 million as an example, and using cost segregation along

with bonus depreciation to write off our W-2 income this year. I have a

few properties that I have been looking at, and most likely I'll

purchase one this week. If cost segregation is completed before the end

of the year and the property is listed on Airbnb and we meet the

material participation requirement, is it all realistic to do this year?

It's also hard to find a CPA who can answer these questions on an

hourly basis. Please provide a list of CPAs who are experts in

Short-Term Rentals (STRs) and could work on an hourly basis. Thanks.

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
10mo

@Prem S., I’ll answer this from a tax perspective. Yes, it is still realistic to pull this off in the same year if you move quickly. For STRs, you do not need REP status. You only need to materially participate and have the property available for rent before year end. If you place it on Airbnb, get guests in, and complete a cost segregation study, you can take bonus depreciation against W2 income as long as you meet the hour requirements.

The key parts are: buying the property, putting it in service, tracking your hours, and getting the cost seg report done in time. Many investors do this every year.

I just sent you a DM with resources that will actually help you get this strategy right, way more useful than a list of CPAs. Feel free to check it out anytime.

Good luck, and happy to connect.

INVESTOR FRIENDLY CPA®5240 Reviews
TaxMD® | Tax Planning Software
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  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    10mo

    Hey Prem

    I recommend using the tool above near the top of this page called "build your investment team" > "tax pros" there are a lot of CPA's on here that can help with exactly what you are looking to do.  Good luck!

  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    10mo

    @Prem S., I’ll answer this from a tax perspective. Yes, it is still realistic to pull this off in the same year if you move quickly. For STRs, you do not need REP status. You only need to materially participate and have the property available for rent before year end. If you place it on Airbnb, get guests in, and complete a cost segregation study, you can take bonus depreciation against W2 income as long as you meet the hour requirements.

    The key parts are: buying the property, putting it in service, tracking your hours, and getting the cost seg report done in time. Many investors do this every year.

    I just sent you a DM with resources that will actually help you get this strategy right, way more useful than a list of CPAs. Feel free to check it out anytime.

    Good luck, and happy to connect.

    INVESTOR FRIENDLY CPA®5240 Reviews
    TaxMD® | Tax Planning Software
    • Real Estate Agent · Salt Lake City, UT · Member since 2020 · 490 posts · 205 votes
      10mo
      Quote from @Ashish Acharya:

      @Prem S., I’ll answer this from a tax perspective. Yes, it is still realistic to pull this off in the same year if you move quickly. For STRs, you do not need REP status. You only need to materially participate and have the property available for rent before year end. If you place it on Airbnb, get guests in, and complete a cost segregation study, you can take bonus depreciation against W2 income as long as you meet the hour requirements.

      The key parts are: buying the property, putting it in service, tracking your hours, and getting the cost seg report done in time. Many investors do this every year.

      I just sent you a DM with resources that will actually help you get this strategy right, way more useful than a list of CPAs. Feel free to check it out anytime.

      Good luck, and happy to connect.


       You can do the cost seg the following year for 2026 but everything else Ashish described is totally correct! Great breakdown on it

  • Member since 2025 · 29 posts · 7 votes
    10mo

    It is realistic to pull off an STR + cost seg + bonus depreciation play this late in the year, but only if you move quickly and hit the technical requirements cleanly. The big pieces are: (1) you must place the property in service before 12/31 that means livable, furnished, photographed, and actually listed; (2) you need to meet one of the STR material-participation tests, which usually means putting in 100+ hours yourself and doing more than anyone else; and (3) the cost seg firm needs enough time to run the study and deliver the report so your CPA can book the depreciation. Plenty of investors pull this off in December you just have to be organized. A lot of people in your income bracket do exactly this as their "first big tax move," and it can dramatically reduce your W-2 burden in year one if executed correctly.

    I’ve been using a tool to track my hours, and it’s made documenting these activities so much simpler. Tools like this help you stay organized on the participation side, so your CPA has clean documentation when they’re ready to run the numbers which usually makes those hourly bills a lot lighter.

  • Member since 2018 · 5 posts · 3 votes
    10mo

    Thanks again for all the interactions. My financial advisors are recommending me against trying to pull it off this year.

    My tax advisor strongly cautions against rushing to claim the full tax deduction for the 2025 tax year. Their primary concern is the "difficult fact pattern" created by closing on a major asset in early December and attempting to operationalize the business and accrue Material Participation (MP) hours within a three-week sprint. The advisor notes that this situation creates a risk of looking like a "manufactured tax shelter," which increases my audit risk.

    The core financial risk is that if I miss the minimum required MP hours  by the December 31st deadline (or got audited and couldn't defend), the substantial 100% Bonus Depreciation loss that I generate from the Cost Segregation study will be disallowed as a deduction against 2025 active W-2 income and become a "suspended passive loss." This would mean I took on all the risk and expense of the transaction for zero immediate tax benefit. My advisor strongly recommends setting the official "Placed in Service" date for January 2026. Since the Bonus Depreciation rate is 100% in 2026 (based on current legislation), and I lose no dollar value of the deduction; this merely guarantee the full 12 months to accrue the necessary MP hours and secure the deduction against your 2026 income.

    While at the fundamental level I agree with my tax advisor, I have already accrued 20+ hours via inspection, insurance shopping and other administrative tasks and have a good plan of action for rest of year. I genuinely want to hear from other folks especially if you have gone through something similar or you are CPA and have supported this kind of cases for your clients. What do you all think? By pushing to 2026, I will miss to offset the 2025 W2 income since I already have plan to get another rental property in 2026.

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