STR Material Participation - Out-of-State Owner, No Property Manager

[Laura S.]

I have never posted before but am really hoping for input from STR owners and CPAs on whether I may qualify for material participation under the STR tax loophole as I am quite sure I do but my CPA says otherwise.

Background:

• Bought STR in 2022 in a popular ski area
• Put into service late 2023, been a solid performer since; we did the basic cosmetic work ourselves and used trades for major upgrades
• Average guest stay under 7 days
• Live in tristate area, home is in VT
• Self-manage (no property manager), rotate cleaners seasonally and have separate people doing snow removal, hot tub, lawn mowing

My CPA says I can't claim material participation because I don't live in the same state as the property. But I just spoke with a friend who has an STR equally far away and his CPA approved material participation. Now I'm questioning whether I missed out on claiming this for 2023-now.

My Activities (easily 100+ hours/year):

• All guest communications and booking management
• Coordinating cleaners, snow removal, lawn care, hot tub maintenance, contractors
• Ordering all supplies
• DIY repairs and painting during visits
• Taking marketing photos
• Town permitting correspondence (new regulations enacted this year)
• This year: intensive setup of new booking management software with virtually no user interface (smh OwnerRez)
• All of this is not including travel which I understand is something that is typically not viewed as applicable

My Understanding: I believe I meet Test #3: 100+ hours annually, and no one else (not cleaners, contractors) spends more time on the property than I do.

Questions:

1. Does living out-of-state actually disqualify me from material participation? (My CPA says it triggers an audit, friend's CPA was fine with it)
2. For those who've claimed this successfully while living far from the STR - how did you document it?

I'm considering switching CPAs to someone more familiar with STR tax strategy, but wanted to get some real-world perspectives first.

Anyone dealt with this situation? Any CPA recommendations who specialize in STR tax?

[Andrew Steffens]

I agree with Aaron, most of my clients live outside of FL and have houses here with me.  I have heard some differing opinions on a few nuanced items but I 100% think you are fine and should consult with a new CPA.  Good luck!