All Forum Posts by: Jason Malabute

Congrats on converting your first home into a rental—great way to get started in real estate investing! One general tax tip: since this is now a rental, make sure you’re taking advantage of depreciation deductions. It’s a non-cash expense that can help reduce your taxable income each year. Be sure to work with a qualified tax professional so they can apply the depreciation correctly for 2025. Keep it up!

You can check Google and Facebook—those are the most popular places to find reviews for real estate CPAs. But I’d also recommend asking other real estate investors in your local area or even here on BiggerPockets. Online reviews are helpful, but personal recommendations from people you trust who already work with a great real estate accountant go a long way.

You can check Google and Facebook—those are the most popular places to find reviews for real estate CPAs. But I’d also recommend asking other real estate investors in your local area or even here on BiggerPockets. Online reviews are helpful, but personal recommendations from people you trust who already work with a great real estate accountant go a long way.

What I might do could be completely different from what you should do—it really depends on your overall goals. Are you trying to grow your portfolio? Liquidate and get as much cash as possible? Get cash while minimizing taxes? Each of those paths leads to a different strategy.

If your goal is to get the most cash quickly, then selling everything might be the answer. If you’re focused on minimizing taxes, you might look into refinancing or a cash-out strategy. If cash flow is the goal, I’d start by increasing rents and charging rent to your son. Ultimately, your decision should be based on your long-term goals and current financial situation.

If you’re receiving the full rental income on a 1099 from Airbnb or VRBO but are managing the property on behalf of someone else, such as your in-laws, you generally need to report the full amount as income. However, you can deduct the portion you remit to them as an expense, provided you issue them a 1099-MISC and properly document the arrangement. This ensures you’re only taxed on your share of the income.

Starting an LLC is not a tax-saving strategy—it's primarily an asset protection strategy that helps limit personal liability but generally does not change how your income is taxed.

Starting an LLC is not a tax-saving strategy—it's primarily an asset protection strategy that helps limit personal liability but generally does not change how your income is taxed.

If your in-laws sell you the property through owner financing, they may be able to report the gain using the installment sale method under IRC §453, which spreads the capital gains tax over the life of the loan instead of paying it all upfront. This can help reduce their immediate tax burden, but they’ll still need to report the interest income annually.

The poster is referring to the $25,000 special allowance under Section 469 of the tax code, which allows certain taxpayers to deduct up to $25,000 in passive losses from rental real estate against their active income. This allowance applies only if the taxpayer actively participates in the rental activity and has a modified adjusted gross income of $100,000 or less, with the benefit phasing out completely at $150,000. However, this rule often doesn’t apply to short-term rentals. If the average guest stay is seven days or less, the IRS typically does not treat it as a rental activity but instead as a business. In that case, if the taxpayer materially participates in managing the short-term rental, the activity is considered non-passive, and any losses can already offset active income without needing the $25,000 special allowance.

Hi Amanda,

We can’t recommend specific CPAs directly here due to BiggerPockets’ rules, but I’ll share a quick tip that can help you screen potential CPAs who say they specialize in short-term rentals:

Ask them whether short-term rentals are depreciated over 27.5 years or 39 years.

This is a trick question — the correct answer is 39 years. Unlike traditional long-term rentals, short-term rentals (like Airbnbs) are classified as nonresidential under tax law, so they use a 39-year depreciation schedule, not the 27.5-year residential schedule.

Also, one suggestion: instead of focusing on finding an “affordable” CPA, it’s often better to prioritize finding a knowledgeable CPA who can deliver tax savings and strategic advice that far outweigh the fee you pay.

Best of luck building your STR portfolio!

That's not true — it's a common misconception. California doesn't care where your LLC is registered. If you live in California or if your LLC is doing business in California (including earning income sourced to CA), you’re generally subject to the $800 annual franchise tax.

Even if the property is held in a Wyoming Statutory Trust or an out-of-state LLC, if you're a California resident or derive income from California, the Franchise Tax Board (FTB) will still come after you. As they say — the price of nice weather is $800!

Great question — and it’s great that you’re thinking strategically about using real estate to offset W-2 income.

To create paper losses through depreciation, it depends on several factors — especially the property type and how much of the purchase price can be allocated to depreciable components through a cost segregation study. These typically include personal property and land improvements, which are eligible for bonus depreciation.

Also, just a quick correction: for 2025, bonus depreciation is currently set at 40%, not 20%. It’s been phasing out each year since 2023.

Depreciation timelines also vary depending on the property’s use:

• Residential rental property is depreciated over 27.5 years.

• Commercial property is depreciated over 39 years.

• And here’s an important nuance — if you’re using the property as a short-term rental (i.e., average stay is less than 7 days and you materially participate), it’s not considered residential under the tax code, so the default depreciation period is 39 years, not 27.5.

Because of all these variables — including how much can be allocated to bonus-eligible assets, the type of property, and how it’s used — there’s no one-size-fits-all estimate for how much real estate you’d need to acquire to generate $200K in paper losses. It really depends on the specifics of the deal and structure.