The Top Tax Benefits For Short-Term Rentals

If you are into Airbnb or VRBO, what are the top tax benefits and loopholes for short-term rentals? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

• We have to clean the short-term rental the first year to get the hours necessary for active/material participation. It is a 90-to-120 (minute or mile) drive one way. Since we will be working, can we stay in the unit that night without counting it as personal use? You can include the travel time. However, staying the night will not count toward working on it. It definitely counts as personal use.
• I have a beach house that I'm starting to rent out, so I got a DBA business name. I've been renovating and fixing it up to make it more attractive. I have a regular job and was told that if I made more than $150,000, I would not be able to write off my expenses and costs associated with my rental. Is this true? It depends on if it’s a rental or residential investment. Also, in some states and counties, the DBA is a fictitious name, and it offers no kind of protection or benefit at all.
• Can you explain the short-term rental tax benefit and how to get 100 hours of material participation? If short-term rentals are seven days or less, it's a business. Determine if it’s 1245 or 1250 property and passive or active/material participation income.
• I have a four-unit that I want to live in and rent out the other three units. What are all the tax deductions and write-offs I can use to zero out earnings? Bifurcate it into two properties. One unit would be your personal residence and the other 75% would be rental properties. Any expenses related to your rental unit would go against your real estate taxes and mortgage interest.

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Resources:

Next Level Real Estate Asset Protection by Clint Coons

https://www.amazon.com/Next-Level-Estate-Asset-Protection/dp/1950863883

Cost Segregation Authority

https://aba.link/CSA

Real Estate Professional Status

https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf

Capital Gains, Losses, and Sale of Home

https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home

26 U.S. Code 121 Exclusion

https://www.law.cornell.edu/uscode/text/26/121

Schedule E

https://www.irs.gov/forms-pubs/about-schedule-e-form-1040

Anderson Business Advisors

https://andersonadvisors.com/

Anderson Business Advisors on YouTube

http://aba.link/YouTube

Anderson Business Advisors on Facebook

https://www.facebook.com/AndersonBusinessAdvisors/

Anderson Business Advisors Podcast

https://andersonadvisors.com/podcast/