Updated 13 days ago on . Most recent reply
Depreciation for STR partnerships/joint ventures
I'm getting into short term rentals. To start out, I'm am partnering with a family member. They will provide half of the capital and I will provide the other half. I will also be in charge of the day to day management (I will get a management fee) and they will be a silent partner. The plan is for me to qualify for the STR tax "loophole." If I meet the requirements for material participation and all of that, would my 50% of the depreciation count towards my W-2 and theirs would be passive depreciation?
Most Popular Reply
#5 Tax, SDIRAs & Cost Segregation Contributor
- Los Angeles, CA
- 11
- Votes |
- 19
- Posts
#5 Tax, SDIRAs & Cost Segregation Contributor
- Los Angeles, CA
@Christopher Tile is right. it's really about who materially participates. If you're the one meeting the STR participation test, your share can be treated as nonpassive while your partner's stays passive.
Where it gets tricky in practice is how the partnership is structured. The allocation of depreciation doesn’t always have to follow capital 50/50 if the agreement is set up that way, but it has to have economic substance and be defensible.
I’d definitely have a CPA structure it upfront so you don’t end up with the wrong allocation on paper.
- Jonathan Hersh
