All Forum Posts by: Anna Antipkina

Hi all! Great info here. Thank you for sharing, first of all. For some background....I'm currently working with my CPA to setup my STR that I manage myself (I have a cleaner and landscaper aside from me). I acquired it in 2022 so this is the first time I'm filing taxes on it. We're setting it up on Sch C and from what he told me, if I set it up on Sch C, I have to stick with Sch C and can't bounce back to E. 2022 shows a loss as that is the year it was setup. His warning to me is that once it starts to turn a profit, which most STRs do, I will have to pay Uncle Sam quite a bit. I'm ok with that. Running a business comes with paying taxes and I will work with my CPA to write-off/depreciate whatever I legally can as a business owner.

I see a bunch of discussion around "substantial services". Does providing complementally k-cups/teas, popcorn, spices, toiletry essentials (toothbrushes, floss, bath wash, shampoo, conditioner, soap, paper products, makeup remover, laundry detergent, firewood with firestarters for the fireplace and firepit constitute as substantial services? We are also looking to start providing complimentary maple syrup ( VT ). Does that also equal as substantial?

Thank you in advance!

Hi Matt, Im also looking into this and following reshoring of semicon. if you have any insight on this topic, send me a DM. 

Thank you all for the sanity check! I contacted a CPA that someone in this forum recommended who's local to me and versed in RE investing. Had to have an unpleasant back and forth on tax regulations with my OG CPA. Felt new to know more on certain tax codes than someone who's been filing taxes for decades. He fought me hard on the content I shared with him, but when he looked it up himself he told me I was right in the end. I told him I appreciate everything he's done for me thus far, but I need to work with someone who practices RE investing tax strategies often. We parted ways cordially. 

Quote from @Michael Plaks:

Quote from @Russell Fugitt:

Anyone want to explain if I am going to have to pay self-employment tax on my earnings if my STR earnings are not passive?  I have a tax guy telling me that I have to pay myself some amount and pay the employment tax on this payroll if it is active income.

No self-employment tax on STRs, unless you operate them hotel-style with daily maid service or some other special services.

Your tax guy fell into a very common confusion related to STRs. Passive v. non-passive matters for one specific purpose: determining whether you can take losses. SE tax deals with an entirely different concept of "net earnings from self-employment", and renting real property is exempt, both LTR and STR.

Thank you Michael for putting our minds at ease.

Quote from @Russell Fugitt:

Anyone want to explain if I am going to have to pay self-employment tax on my earnings if my STR earnings are not passive?  I have a tax guy telling me that I have to pay myself some amount and pay the employment tax on this payroll if it is active income.

Found this article because you got me thinking. Seems there's quite a grey area for now, but may be something to watch as the IRS gets more interested in this growing supply of STRs. Providing more services and amenities for your guests is what's going to continue to help you stand out among the competition and competition is getting fierce so doing more and better than the rest only happens naturally. https://hbkcpa.com/beware-vaca....   

@Pratap Singh I'm also trying to figure this out right now. I purchased my first STR at the end of 2022 and got it up and running and starting managing bookings and guests in November. I kept a very diligent log of all the time I spent setting up the house itself, all my systems and processes and all my guest and cleaner communication. I came up with 140 hours at least in 2022.

Spoke to my CPA about the STR tax loophole and first he told me i have to make LESS than $125k in order to claim losses against my W2 income. Then I sent him the specific ruling on the STR loophole with the 7 tests mentioned by Ian and he then said that in order for me to pass the 100 hour test, I have to have worked less than 100 hours in my W2 which obviously would never pass. On top of that he said that in order to pass the second test that Ian laid out above, you have to have spend at least 50% of your time managing the STR (50% is calculated from the total W2 hours you work + the hours you spent managing your STR) My example would be 1,700 hours on my W2 + 140 hours on my STR) Based on that OF COURSE I would fail the 100 hours test every time.

So he told me the only way I can take advantage of the STR tax loophole is if I have 10+ properties + REP status or I was retired. Is he right? Or am I talking to the wrong guy?

Sorry guys, bad news. His permit request was denied because that township has specific STR permit limits per the new STR ordinance and so the zone his property is in is maxed out for 2023. I'm not surprised because the area is far more residential than anything else, hence why if anyone is looking to invest in STRs, the days of easy money no matter where are over unless there's another global lockdown around the corner. Research and due diligence is crucial prior to going under contract. The zoning officer suggested submitting an offer with a contingency; subject to permit approval, but I presume that could very easily kill your offer. The other option is to wait 1-2 weeks for the zoning officer to confirm how many permits they can still give out and then submit your offer, but that wait time may lose you the deal as well, not to mention by the time to go to submit the application, which is $500, you can still get denied if you're the last in line. My opinion is focus on the true vacation markets and locations that thrive on STRs. The regulations themselves can give you an idea of how the residents and local government feel about STRs. So using this town as an example, I would have passed on looking for an STR there.

Quote from @Bryan S.:

Sorry to hear that! 

Have you tried going down to the city office and speaking with them to learn more / see if they can make a “one time exception” or have any other alternatives. Perhaps file for a commercial “Bed and Breakfast”. I’d chat with the decision maker in person and see if there is any other options they know of or can give any other advice 

Yes, waiting for a call back from the zoning officer. I'll share back what I find out if anyone is interested.

Thank you all for your input and insights. I can understand what's happening with STRs in traditionally residential areas. I think there will always be room for STRs, but in true vacation destinations that rely heavily on tourism. I successfully setup one in a ski resort town. My exit strategy, should things change, is to sell because it just wouldn't cashflow as an LTR, but given the political views in the state and town, I dont anticipate issues. It seems my friend is able to pull out of the deal and pivot to a different town and strategy. Thank you all again!

Hi everyone,

Please refrain from mentioning the obvious, I'm hoping someone can help my friend out of this tricky situation. He's closing in a week on a property he was going to STR in South Hanover PA township near Hershey PA and found out today denied his application as they are not accepting any more applications for 2023. Does anyone either know someone in that township that can help resolve or knows how to navigate the STR regulations in South Hanover? Thank you in advance!