STR Tax Loophole 30 Day Rental

[Scarlett G. Banks]

Hello, I've been researching how to lower my tax burden and discovered RE Professional status which is being phased out. Hopefully Trump brings back the 100%. But there's also STR scenarios to qualify for active income deductions. I was reading the forum and everyone was mentioning renting for an average of 7 days or less but that's only one scenario and I believe it doesn't have to hit all the scenarios, just one.

Is anyone renting for 30 days and using the other scenarios to qualify for active STR Tax breaks?

AirDNA article for reference:

https://www.airdna.co/blog/short-term-rental-tax-loophole?ut...

"The average guest stay is between 8 and 30 days, and you provide significant services – If guests stay more than seven days but less than 30, your rental may still be non-passive if you provide substantial services beyond basic maintenance. This includes things like:

Daily cleaning

Concierge services

Meals or room service

Other hotel-like amenities

You materially participate – You can still override the per se passive rule by proving that you actively manage the property. This requires meeting one of the IRS’s material participation tests, which we’ll cover shortly."

I want to have a clear plan for how to qualify for the STR Tax break before I invest and. Then get a cost segregation study and give that to an accountant.

Is anyone running 30 day rentals and what method do you use to qualify for active income status? Daily cleaning is an easy service to offer tenants. I'm wondering what else you can do that won't be too much of a hassle. And what records do you provide your accountant in case there's an audit? 

Thanks in advance!

[Stephen Nelson]

@Scarlett G. Banks Just to be technical, what really happens with a motel or hotel, or some other real-estate-y business where there is significant personal services, is it's not considered a rental activity. And that means the only thing that matters in terms of passive vs. nonpassive is whether you or you and your spouse materially participate.

The regs say this about what significant personal services are:

(iv) Significant personal services—(A) In general. For purposes of paragraph (e)(3)(ii)(B) of this section, personal services include only services performed by individuals, and do not include excluded services (within the meaning of paragraph (e)(3)(iv)(B) of this section). In determining whether personal services provided in connection with making property available for use by customers are significant, all of the relevant facts and circumstances shall be taken into account. Relevant facts and circumstances include the frequency with which such services are provided, the type and amount of labor required to perform such services, and the value of such services relative to the amount charged for the use of the property.

But frankly? This doesn't really seem like a real estate investment. You're running some other trade or business.

BTW the other thing I'll mention is, I don't think the Section 469(c)(7) rule (aka "real estate professional") is being phased out. That's in the statute. Congress can change the law. But I don't think there's any serious move to do that.