Rather, it will be considered earned income... and if you have losses especially the first year with a bunch of start up costs and depreciation... and if your money is at risk (let's assume Yes), then this business venture can offset (or add) to your W-2 income.This is how short-term rental loophole works.

The short term rental loophole is for rentals where the average stay period is 7 days or less.

Hey Ajul, that bonus depreciation is no longer at 100%. in addition to that, you need to qualify as REPS or be using the short term rental loophole to even be able to take advantage of that deprecation against your active income.

Please keep in mind that unless you are a real estate professional or utilizing the short-term rental loophole strategy, you are creating passive losses that can only offset passive gains.

The short term rental loophole is for rentals where the average stay period is 7 days or less.

If it was for NONPAYMENT OF RENT, there are loop holes there and they can drag it out.

I would also ensure you can even qualify for the cost seg by making sure you either qualify for REPS(real estate professional status) or STR loophole (short term rental loophole)

or is there a loop hole??

Dont know if he knew of this loophole or was trying to be a jerk but worked in his favor.

If the house is located in prime area, perhaps STR would makes sense with some tax loopholes that you can achieve and save.