Has Anyone in CFL Bought a STR Recently (2022+) to Offset Their W2 Income Tax

[Andrew Galloway]

Hello Bigger Pockets CFL community. I am looking into the STR and STR/bonus appreciation strategy as a way to offset W2/short term income. Since the market pre-May 2022 just is not comparable anymore I am interested in anyone who has done this in CFL from around May 2022 onward successfully and how it went.

The goal would be to aquire a STR that would cash flow itself, or at worst break even and also use that to maximize deductions to lower W2 federal income tax. I've read about strategies to do this and bonus depreciation and how the 1 year bonus depreciation is being phased out. While Orlando is a huge STR market, I'm also aware that it is currently a tough and saturated market.

If anyone has successfully done this in CFL, please give as much detail about how you did it and how it went. Or if you tried it and it failed also let me know. Another caveat: there are a lot of STRs out there that are breaking HOA/local government/state/federal laws or strongly bending the rules, and I'm looking for people who did not do that or who mitigated risk there.

For myself, I am a high income W2 earner and I currently have FEIE foreign income tax exclusion but at some point I have to be able to return to the USA fully or at least hedge against that possibility. So I am looking at this as a way to decrease my federal income tax if I lose FEIE. Otherwise I would start getting hit with very nasty taxes. I also am looking at this strategy for a family member who is in the area with W2 income.

Thank you!

[Josh Green]

Quote from @Andrew Galloway:

Hello Bigger Pockets CFL community. I am looking into the STR and STR/bonus appreciation strategy as a way to offset W2/short term income. Since the market pre-May 2022 just is not comparable anymore I am interested in anyone who has done this in CFL from around May 2022 onward successfully and how it went.

The goal would be to aquire a STR that would cash flow itself, or at worst break even and also use that to maximize deductions to lower W2 federal income tax. I've read about strategies to do this and bonus depreciation and how the 1 year bonus depreciation is being phased out. While Orlando is a huge STR market, I'm also aware that it is currently a tough and saturated market.

If anyone has successfully done this in CFL, please give as much detail about how you did it and how it went. Or if you tried it and it failed also let me know. Another caveat: there are a lot of STRs out there that are breaking HOA/local government/state/federal laws or strongly bending the rules, and I'm looking for people who did not do that or who mitigated risk there.

For myself, I am a high income W2 earner and I currently have FEIE foreign income tax exclusion but at some point I have to be able to return to the USA fully or at least hedge against that possibility. So I am looking at this as a way to decrease my federal income tax if I lose FEIE. Otherwise I would start getting hit with very nasty taxes. I also am looking at this strategy for a family member who is in the area with W2 income.

Thank you!

As Ray mentioned - I do this a lot for many clients that are out of state. I've purchased at least 20+ in the last 12 months and I've bought 3 myself. I used bonus depreciation on 2 I bought last year and wrote off over $350k. I'm a real estate pro so material participation isn't an issue, but the majority of my clients are in the $300k-$900k/yr gross household income range and so using STRs is not only the best way to get great ROI on real estate nowadays but the tax benefits are the primary driver for most including myself. Feel free to DM and we can see if you'd be a good fit the market I work and if not, at least I can give you a few pointers as far as STR fundamentals and a couple resources for cost segregation.