I may have interpreted this incorrectly but I was reading on this forum some people saying that you cannot deduct anything on your STR until after it is technically available to rent because until that point it's not technically a business.
Doesn't sound right to me because if you have to do a rehab on it and have to purchase tools/materials to accomplish that, then this would obviously be done prior to the property being available to rent which would mean you wouldn't be able to deduct those tools/materials used for the rehab?
Would a way around this be to advertise it for rent as soon as you buy it and while you are doing the rehab?
Hi @Dave Price - The rules are nuanced as all IRS rules are. If you check out IRS publication 535 and search it for 'start-up costs' you'll find some sections that have good information and probably answers to most of your questions (at least in the abstract). Advertising doesn't mean you're open for business...I wish it was that easy :)
Hi @Dave Price - The rules are nuanced as all IRS rules are. If you check out IRS publication 535 and search it for 'start-up costs' you'll find some sections that have good information and probably answers to most of your questions (at least in the abstract). Advertising doesn't mean you're open for business...I wish it was that easy :)
Would a way around this be to advertise it for rent as soon as you buy it and while you are doing the rehab?
Probably. Just have your available dates start at a certain time after you do the rehab. Besides, this is February. You have until December to get it running. Next January is when you file with all your expenses and revenue.
Hey @Dave Price, so here is what we did our first year. We were busy outfitting the house and taking care of a few things that it needed, but we did have it advertised on Craigslist. We took bookings from people we knew for the first year while we got it ready.
We were able to deduct the expenses seeing as we were advertising and reported bookings and revenue for our first year. It was limited yes, but it seemed to meet the requirements.
4 years later we are going gangbusters.
This is just what we did and how it worked out, I would check with your CPA on what do to. I will say that a good CPA who invests in real estate is a great asset to have. Ours has saved us a lot of dough over the last 4 years. Well worth the cost.
Make sure they are investing in real estate and not just reading about it all. Ours has 36 doors and a growing portfolio.
Hi @Dave Price - The rules are nuanced as all IRS rules are. If you check out IRS publication 535 and search it for 'start-up costs' you'll find some sections that have good information and probably answers to most of your questions (at least in the abstract). Advertising doesn't mean you're open for business...I wish it was that easy :)
Thanks for the suggestion, I'm reading 535 right now!
Would a way around this be to advertise it for rent as soon as you buy it and while you are doing the rehab?
Probably. Just have your available dates start at a certain time after you do the rehab. Besides, this is February. You have until December to get it running. Next January is when you file with all your expenses and revenue.
Hey @Dave Price, so here is what we did our first year. We were busy outfitting the house and taking care of a few things that it needed, but we did have it advertised on Craigslist. We took bookings from people we knew for the first year while we got it ready.
We were able to deduct the expenses seeing as we were advertising and reported bookings and revenue for our first year. It was limited yes, but it seemed to meet the requirements.
4 years later we are going gangbusters.
This is just what we did and how it worked out, I would check with your CPA on what do to. I will say that a good CPA who invests in real estate is a great asset to have. Ours has saved us a lot of dough over the last 4 years. Well worth the cost.
Make sure they are investing in real estate and not just reading about it all. Ours has 36 doors and a growing portfolio.
Thanks Michael! Great advice and that is what I was kind of thinking if that's what we had to do to qualify for being "open for business".
Currently in search for a good CPA in AZ that invests in STR's themselves. Thanks again!
You are welcome @Dave Price, remember that you don't have to get a CPA local. For example ours is located in Spokane WA. That is about 300 miles away, closer to our lake house in Idaho.
You are welcome @Dave Price, remember that you don't have to get a CPA local. For example ours is located in Spokane WA. That is about 300 miles away, closer to our lake house in Idaho.
YUes good point, I'm looking within State of AZ but not necessarily within my city