All Forum Posts by: Alex Garcia

There is also no cap on using bonus depreciation- there is a cap on utilizing passive losses, which is $150k. However...often short term rentals are non passive. and MANY CPA's get this wrong.

Here's the correct answer:

Short term rentals with an average stay of more than 7 days = passive income

Short term rentals with an average stay of less than 7 days AND you meet one of the IRS tests (there's 7) of material participation = non passive income

Short term rentals with an average stay of less than 7 days AND you provide substantial services = non passive AND subject to self employment tax

So IF you materially participate in the rental and the average guest stay is <7 days it's non passive income, which makes losses not subject to the passive loss income limits. So you can utilize bonus depreciation to create deductbile losses.

This is the info I have found too, I'm in a similar situation that OP and trying to find a way to reduce my w2 tax liability.

I am exploring the idea of getting STR and use bonus depreciation, my question is this:

Say that I get the property, I get the cost segregation, and I do the bonus depreciation while operating my STR with average stays of 7 days or less and material participation on year 1.

Can I then use that bonus depreciation against my w2 income and carry over any excess from year 1 if on year 2 I turn around and convert the property into a long term rental? Is that allowed?

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Post: Short Term Rental Bonus Depreciation for high income earner