Rental Property Investor · Delmar, MD · Member since 2020 · 32 posts · 13 votes
In 2022....
I renovated 23% of the square footage of my primary residence (addition on the house that has a private entrance) and launched that space as an STR.
The average daily use was/is less than 7 days.
I kept/have accurate time logs for me and all other individuals during the renovation and after the launch. I participated more than 100 hours and more than any other individual.
I did not use or make of use of the space for personal use.
It operated/operates as a STR using the AirBNB platform.
My expenses were $28,000 for the renovation, furnishings and all other costs associated with launching and operating the STR.
My revenue from the STR was $1,500.
I earned $109,000 of non-passive income at my W2.
1. Do I depreciate over 27.5 or 39?
2. Am I limited to the Passive Activity Loss Limitation of $25K and the phase out, or do I have an exception whereas I can take all of my STR loss towards my non-passive W2 income?
You should definitely call your CPA to confirm. My wife and I are going through the same process this year and are currently working through a Cost Segregation. Your describing material participation and average stay less than 7 days sounds like you should be ok. You definitely want to have the accurate time logs as well. Check with your CPA and don't hesitate to reach out to another CPA that specializes in this area. This is the last year to deduct 100% of the assets identified in a cost segregation so if you're not already pursuing that ... you're running out of time.
You should definitely call your CPA to confirm. My wife and I are going through the same process this year and are currently working through a Cost Segregation. Your describing material participation and average stay less than 7 days sounds like you should be ok. You definitely want to have the accurate time logs as well. Check with your CPA and don't hesitate to reach out to another CPA that specializes in this area. This is the last year to deduct 100% of the assets identified in a cost segregation so if you're not already pursuing that ... you're running out of time.
Do you have a CPA that specializes in real estate taxation? Real estate has so many tax benefits and credits available, that I always tell people it's crucial to have a CPA that's extremely knowledgeable in this area. This would be an excellent question for them. I have worked with a number of great CPAs over the years and would be more than happy to provide you with recommendations if you'd like?
CPA/Investor · Bronx, NY · Member since 2018 · 236 posts · 45 votes
3y
Generally, you would depreciate it over 27.5 years since it is an Airbnb platform. And there is passive income loss limitation of $25k per year and the excess loss can be carried over for the next year. It will start to phase out when your income reaches $150k.
I would suggest you discuss with a CPA who specializes in real estate and have a more in-depth conversation to give you a better understanding of your situation. You will be able to write off a lot of expenses which will help you out eventually with your taxes.