Short Term Rental Tax Strategy
The STR Loophole Explained
The Short Term Rental (STR) Loophole is a powerful tax strategy that allows real estate investors to use depreciation from short-term rentals to offset W-2 and active income, without needing Real Estate Professional Status.
Average Stay < 7 Days
Your property must have an average guest stay of 7 days or less to qualify as a short-term rental
100+ Hours & Most Time
You must materially participate with 100+ hours AND more time than anyone else on the property
Offset Active Income
Use bonus depreciation and cost segregation to create paper losses against your W-2 income
Why This Strategy Works
Unlike traditional rentals that generate passive losses (only offsetting passive income), the STR Loophole reclassifies your rental as a non-passive activity. Combined with cost segregation and bonus depreciation, you can generate significant paper losses to reduce your tax bill, even with a profitable property.
Proper documentation of your hours is critical. REPS Time helps you track every minute to prove material participation and protect your deductions in an audit.