Cost segregation tax write off when STR is not generating positive cash flow yet

[Aidan Wong]

Hello, 

I have a short term rental which has not generated positive cash flow yet and I have been managing it actively more than 100 hours this year and qualify as an active participant. I am not a licensed real estate professional and I have a W2 job and paying my income taxes. Although I have been receiving income from my STR Airbnb and VRBO listing, it has not generated positive cash flow yet, I am planning on keeping the STR property for a several years and I am wondering whether a cost segregation would benefit me for accelerated depreciation and tax write off?

Thank you 

Aidan Wong,

The STRaight noobie

[Sean O'Keefe]

Quote from @Aidan Wong:

Hello, 

I have a short term rental which has not generated positive cash flow yet and I have been managing it actively more than 100 hours this year and qualify as an active participant. I am not a licensed real estate professional and I have a W2 job and paying my income taxes. Although I have been receiving income from my STR Airbnb and VRBO listing, it has not generated positive cash flow yet, I am planning on keeping the STR property for a several years and I am wondering whether a cost segregation would benefit me for accelerated depreciation and tax write off?

Thank you 

Aidan Wong,

The STRaight noobie

Be sure that you meet the IRS requirements to be considered a STR (defined by Treasury Regulation Sec. 1.469-1T(e)(3)(ii)(A))

• The average period of customer use is 7 days or less
• The average period of customer use is 30 days or less. (Confusing we know, this means that not only does the customer stay for 7 days or less on avg. they also don't come back multiple times during the year for separate trips and these stays add up to > 30 days -> Trip one: 7 days, Trip two: 7 days, etc.)
• Personal use of the property cannot exceed 15 days or more OR more than 10% of the total rental days

Provided you meet above and material participation requirements you should project out the tax benefits before paying for cost seg repor and also remember there is depreciation recapture of 25%.