The short-term rental tax write-off, explained.
High earners buy short-term rentals for two reasons: cashflow, and the ability to offset active income. STRturnkey builds turnkey Florida STRs with both in mind — sourcing, renovation, furnishing, and documentation designed so the tax strategy is actually defensible.
The short version
- 1. Buy a property whose average guest stay is seven days or less.
- 2. Materially participate in operating it — usually the 100-hour test, documented contemporaneously.
- 3. Run a cost segregation study and apply bonus depreciation to the short-life components.
- 4. The resulting first-year loss is treated as non-passive and can offset W-2 or business income.
STRturnkey is not a tax advisor and this page is general information, not tax advice. Every one of these steps has real requirements and real failure modes — work with a CPA who has done STR cost segregation before. We work alongside yours, or introduce you to one.
How we build around it
Seven-day average stay
We underwrite and operate for short average stays, the threshold that takes a property out of the standard passive rental bucket.
Cost-segregation-ready acquisitions
We flag renovation scope and furnishing spend so your CPA and cost-seg engineer have clean, itemized basis to work from.
Documentation from day one
Renovation invoices, furnishing receipts, and owner activity records are organized in your client portal, not scattered across email.
Participation-aware management
If you need material participation, we structure the engagement so the hours that matter stay yours — and we tell you plainly when they don't.
Common questions
What is the short-term rental loophole?
Rental real estate is normally passive, so losses can only offset passive income. But if the average guest stay of a property is seven days or less, the IRS does not treat it as a rental activity under Section 469. If you also materially participate in operating it, losses from that property can be treated as non-passive and used against active income such as W-2 wages or business income.
Do I need to be a real estate professional to qualify?
No. Real estate professional status is a separate, much harder test that generally requires 750+ hours and more than half your working time in real property trades. The short-term rental path does not require it — it requires the seven-day-or-less average stay plus material participation in that property.
What counts as material participation?
The IRS lists seven tests. Short-term rental owners most often rely on the 100-hour test (you participate more than 100 hours and more than anyone else, including cleaners, co-hosts, and managers) or the 500-hour test. Contemporaneous time logs matter — hours you cannot document are hours you cannot defend.
How does cost segregation create the write-off?
A cost segregation study reclassifies parts of a property — appliances, cabinetry, flooring, landscaping, site work — into 5, 7, and 15-year property instead of 27.5-year. Those shorter-life components are eligible for bonus depreciation, which front-loads a large paper loss into the first year of ownership.
What about full-service management — does that break it?
It can. If a management company handles operations and logs more hours than you, the 100-hour test fails. This is the single most common mistake we see. Owners who need the tax treatment typically keep specific, documentable functions in-house while outsourcing execution, and they log everything.
Does furniture and startup cost count?
Furniture, appliances, linens, and electronics are typically short-life personal property and are commonly depreciated aggressively in year one. Ordinary operating costs — cleaning, supplies, utilities, software, insurance, mortgage interest, property tax — are deductible against rental income as usual.
Want to model it on a real deal?
Our calculator estimates cash-on-cash, debt service, and first-year depreciation impact. Or book a call and we'll walk your specific situation with you.