Is it possible to use the STR loophole to offset w-2 income if managing out of state?

[Mitchell Maginnis]

Hi!

I am an optometrist and am finishing up building a new build STR out of state. I will have a cleaning team do the day-to-day turnovers and will be using Guesty to assist in helping manage the property myself. I have a partner in the deal as well.

Is it possible to use the STR tax loophole to offset my w-2 income. I know that if i am working, I will not be able to qualify as a RE professional. Hoping to save some $$ on my tax bill in 2023.

[Nancy Bachety]

Yes, it’s possible. You are self managing. You are managing Guesty and your cleaners. You are communicating and spending time doing this. It is essential that you track your time, the actual time of day, number of hours including quarter and half hours. If your partner is also doing this (and partner isn’t your spouse), you must be sure you personally are doing/tracking work, at least 100 hours to be materially participating. And yes, it needs to be actual and real. It does not need to be a contemporaneous log but obviously it’s likely to be more accurate, and acceptable, by the IRS.
I sent my log to the IRS in August. They told me they received it and it’s still pending.