We purchased a property in early October and are placing it in service this week (mid November).We had intended to run a cost segregation study and try to accelerate depreciation which we can deduct against our W2 (assuming material participation).However, we have been reading through the IRS guidelines (eg publication 946 on Property Depreciation) and there seems to be the concept of "short year" which would mean that we can only deduct ~1.5/12 of a year's worth of depreciation in 2024.Is this correct or are there any different rules for STRs specifically?

This year is the first year I will qualify as a real estate professional and be able to take some aggressive deductions through things like cost segregation studies.

We would like to put in a cash offer and quickly recover our money with a refinance and still be able to deduct the interest.

For example, for rental properties, lots of the categorization depends on the REI's specific tax strategy regarding what we're capitalizing versus what we're immediately deducting.

This explains why your taxable income was zeroed out on Form 1040, even if the standard deduction wasn’t utilized.

Section 469(c)(7) provides an exception that allows qualifying taxpayers to treat rental real estate activities as nonpassive, enabling them to deduct losses against other types of income.

It's important to understand the difference, and I'd recommend sticking with the REIT with depreciation advantages.The Tax Cut and Jobs Act (TCJA) includes a 199A deduction and applies to certain income from pass-through entities (including REIT dividends) and allows individuals to take the 20% deduction against REIT dividend distributions that yields an effective tax rate of 29.6% or 37% (80% for upper bracket filers).

The increased depreciation deductions can offset your taxable income, including gains from the sale of the previous property.

And THEN material participation will open the deductions for you.

@Jake Hughes A cost segregation study is a tax strategy that allows property owners to accelerate depreciation on certain parts of a building, resulting in larger tax deductions in the early years of ownership.