STR loophole/cost-seg-- Help needed!

[Viviana Nicolosi]

Hi all! I'll try to keep this short. We have had an STR for just under one year, but we have not qualified (per our accountant) for the STR loophole so we have not cost-seg'd it. I keep hearing how people are cost segregating, but I have pushed my accountant numerous times on this and he just saying that if we did the cost seg, all of that depreciation would just go into a reserve that would then be applied when we sell the home. His stance is that there would be no point as any depreciation would just be carried forward to future years. I think I have figured out why we do not qualify for the STR loophole and why my accountant keeps saying we would not get any money back if we front-end depreciated the home: I have a property management company in place. Now, that is why I am here on BP to ask you all the following: I am getting rid of my current PM at the end of May (in just a few weeks) and I will be hosting the home with a co-host who will act as my new "property manager". Since I will now be the host on Airbnb, does this count as materially participating and can I finally take the STR loophole? Has anyone else done this where they were the host with a co-host who oversaw the property, but they were still able to cost-seg and take the loophole? What am I missing here?? Thank you!

[Benjamin Weinhart]

You would not be able to be classified as "materially participating" under what you propose, you must meet a couple of criteria to be considered including 100hrs+ spent on the business and more time than anyone else. For the income to switch to Sch C reporting, you also need to offer services similar to that which a hotel might offer such as daily housekeeping, food/drink, and potentially various other amenities depending on how you'd like to qualify.

What you describe is simply changing property managers, it doesn't really matter whose name is on the AirBNB listing. It more matters about who is doing what specifically at the end of the day. You can still do a cost segregation study (assuming timing isn't an issue), but the cost of the study may prove to be more costly in the long run for you than just taking regular depreciation on the property.