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Updated 5 months ago on . Most recent reply presented by

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Carolyn McBride
  • Investor
  • Bay Area, CA
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STR Tax Loophole/Strategy So Close to the End of the Year?

Carolyn McBride
  • Investor
  • Bay Area, CA
Posted

I'm about to go into contract on a property I want to use as an STR. I'll likely close on the property around early November and it will need small cosmetic updates, maybe a new deck, and of course new furniture set up.

Since it's so close to the end of the year, I'm wondering if anyone else has had success with the STR loophole requirements and material participation when acquiring a property with only two months left in the year? I'm planning on trying to complete 100 hours of material participation...

Did the IRS have issues with the 100 hours of material participation for only two months out of the year? What types of work were you able to capture as "material participation"? And what are the requirements for how many days the Airbnb needed to have been rented in that year?

I'm wondering if I can qualify by using just 1 or 2 bookings (under 7 days of course) for the year.

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Ashish Acharya
#2 Tax, SDIRAs & Cost Segregation Contributor
  • CPA, CFP®, PFS
  • Florida
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Ashish Acharya
#2 Tax, SDIRAs & Cost Segregation Contributor
  • CPA, CFP®, PFS
  • Florida
Replied

Yes, you can qualify for the STR tax loophole even with only two months left in the year. You'll need to meet the 100-hour material participation rule by actively managing the property—tasks like updates, repairs, and managing bookings count. Or you could meet the substantial participation rule that has no hour requirement.

The property also needs to be rented for fewer than 7 days per guest on average. While there’s no specific number of bookings required, having at least 1-2 bookings should help.

*This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

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