Short Term Rental Loophole and Alternative Minimum Tax Impact

[Austin White]

Community - My wife and I are high-income earners, each with salaries greater than $150,000 per year. We file separately for a student loan strategy. We purchased, renovated, and placed our first short term rental in service at the end of 2022. We were able to bonus depreciate $40,000 through a cost segregation study which I planned to use to offset some of my tax federal taxes of $40,000. When it came time for filing, my CPA told me that I would not be able to use the bonus depreciation because of the Alternative Minimum Tax (AMT). All I've heard is how beneficial this loophole is for high W-2 earners but how is that the case with the AMT impact? The examples I regularly hear are for physicians, tech workers, etc. who certainly make well more than what we make so how are those individuals not impacted by the AMT? I haven't heard it discussed on any podcasts or forums. Any help or guidance would be greatly appreciated. Thanks in advance!

[Melissa Nash]

Bonus depreciation is just that... a bonus! and is going away soon anyhow.  So don't focus on that- if you get it great- if not.... there is SOOOO much more that you are gaining to focus on. 

#1. Use the STR "loophole" (tax benefit) and make sure you are managing more than your PM (if you hire one) or self manage it, its very easy. You can take all your deductions as an active investor. I have a PDF that my CPA gave me, happy to forward it to make sure you can take advantage of this tax benefit, message me. (I am NOT a CPA, but I pay a lot of $$ for one)

#2. Use the Cost seg.... I do this each year on at least 1 property. One of my luxury STR properties got me a $330k deduction. yes, you read that right! I paid ZERO fed taxes bc of cost segregation while making a higher income.

#3. If you are buying and STR- most are in good areas that appreciate...grow your wealth baby and let the guests pay your mortgage down! 

#4. cashflow---- who doesn't want more money??

#5. Hedging inflation- you are literally locking in a rate at todays dollar that is inflating faster than ever before. Borrowing $$$ is how you get rich!!!

#6. You can use and enjoy the property ANY time you want!! I mean- can you say sipping Champaign from your new cabin deck or hot tub?? 

These are the reasons WHY I invest in STR's -- Best of luck! Melissa