The rentals are also taxed, of course, but Airbnb and VRBO automatically collect those fees when each stay is booked.

It looks like the Tax Relief for American Families and Workers Act of 2024 is going to pass soon.

@Justin Ward To be considered by IRS as a short-term rental and get the tax benefits you must meet the following requirements (defined by Treasury Regulation Sec. 1.469-1T(e)(3)(ii)(A))The average period of customer use is 7 days or lessThe average period of customer use is 30 days or less.

Definitely don't recommend doing an early distribution and paying the taxes and penalties. 

We do take advantage of deductions- maxing out both 401ks, HSAs in 2023 and itemizing deductions and will do so in 2024 - so we fall at the lower end of the 24% federal bracket (MAGI of $240-260k- so additional ordinary income is 24% income tax plus whatever Medicare/Social security we must pay on the $40kI know I can retain all the earnings in the LLCand 1031 exchange until we no longer have W-2 wages to reduce our taxes, but I plan on using the $40k for a personal home improvement - replace two HVAC systems and install a new wood deck and landscaping).

So if the delta on your savings versus interest costs is only 2%, and it appears you're a RE professional, your tax advantages will probably make that a wash meaning there's no advantage at all to spending all your cash unless you are just afraid of making a payment. 

As hotels lose market share, these municipalities are losing out on hotel taxes and misc. revenues that are difficult to collect from the small mom and pop STR operators.

Easier to do your taxes as well.....Search here about the need for an LLC when starting out or with just a few properties, usually not necessary or recommended (Except by attorneys-sorry Jason :-)

I was going to talk to CPAs, maybe attorneys, since I need to set up LLCs, do taxes, and advice in general regarding family/generational financial planning, but CFP may be a better route.

This is in the east side of Buda in 78610Property price is around 340,000 and the monthly payment for 80% mortgage at 7.125% with property taxes (2.32%), HOA and Insurance comes out to around 2,600$Rental comps suggest around 2200$ gross monthly rent.