Short-Term Rental Loophole Calculator

The play, in one line

Buy an STR → run a cost-segregation study → a large chunk of the building depreciates in year one (100% bonus in 2026) → that creates a paper loss → because a short-term rental you materially participate in is non-passive, the loss offsets your ordinary income, not just rental income.

Estimate the first-year loss

Purchase price building + land; exclude closing costs Land % of value from your county assessment (not depreciable) Reclassified to fast depreciation a cost-seg study finds the 5/7/15-yr parts — short-term rentals typically land ~20–35%; a study sets yours

Your marginal tax rate on active income (%)

Building (depreciable) basis$560,000

First-year bonus-depreciation loss$112,000–$196,000

Tax saved against your active income$39,200–$68,600

This front-loads depreciation you'd take over years anyway — a timing benefit, and it lowers your basis (more gain when you sell). Losses beyond this year's income carry forward.

Two different tests — don't mix them up

1) Can the loss offset your active income? Yes if your average guest stay is 7 days or less AND you materially participate (you run the bookings, guests, and decisions — commonly ~100 hours and more than anyone else, or 500 hours). That makes it non-passive under §469 — no real-estate-professional status required.

2) How fast is the building depreciated (27.5 vs 39 years)? A separate question. It turns on the ~30-day / substantial-services (transient) test — a house rented in short transient stays is usually treated as commercial (39-year), not residential (27.5-year). This affects the slow portion, not the year-one cost-seg pieces.

Documentation to keep

A log of average guest stay (proving ~7 days or less)

A time log of your participation hours (bookings, guest contact, upkeep decisions)

A cost-segregation study from a qualified engineering firm

Placed-in-service date and the property's business-use records

← All worksheets

Educational only — not tax, legal, or financial advice. ScanMyTaxes is a software tool, not a tax preparer or advisor, and does not prepare or file returns. Every figure here is an estimate based on the information you enter; results are not guaranteed and depend on your specific situation. Confirm all strategies, eligibility, and numbers with your own qualified tax professional before acting. Using this tool does not create a client relationship.