Are expenses on short term rentals tax deductible

[Carlson Driver]

Say if we had a short term rental in Hawaii and were using a property manager to manage it for us which cost us ~$200/month. And we had to replace a dishwasher for $500 in 2021. 

Would the $2400 ($200 * 12) + $500 = $2900 be tax deductible against my W2 earned income in 2021?

[Natalie Kolodij]

Originally posted by @Carlson Driver:

Originally posted by @Natalie Kolodij:

>> 

Short term rentals fall into an in-between where your material participation and average stay length can technically make losses deductible against your w2 income regardless of your adjusted gross income
 >>

My material participation is low since I mentioned Hawaii and I am on the mainland. 

The average stay length is less than 7 days

>> 
you can deduct losses against w2 income dependsing on if your AGI is over or under $150k.
>>

No, my AGI is over $150K

Going back to my original numbers, my day job that provides my W2 at $100K earned income, will the amount $2900 reduce the taxable earned income to $97,100? 

Thoughts?

No- if no material participation and your w2 is over the $150k mark the rentals will be passive. 

This means that any losses incurred will be allowed to: 

-Offset any other passive income sources

-Will then carry forward until you either have passive income, AGI drops, qualify as material participation, or RE professional

-Be alllowed to be deducted when a rental is sold