Cost seg study reclassifies 20–35% of STR building basis to 5/7/15-yr property — 60% bonus (2024) = massive year-1 loss.
A cost segregation study identifies personal property (5-yr: appliances, furniture, decorative lighting) and land improvements (15-yr: fencing, landscaping, parking) within a building purchase — typically 20–35% of depreciable basis. Under §168(k) bonus depreciation (60% in 2024, 40% in 2025), that portion is deducted immediately. On a $600K STR, expect $50K–$150K year-1 loss. Combined with STR loophole, offsets W-2 income directly. Study cost $3K–$10K; typical ROI 20–40×.
Click Generate advisory deep dive for mechanics, IRC citations, a step-by-step execution plan, a worked numeric example on your profile, costs, risks, and this-week actions.
Short-Term Rentals (avg stay ≤7 days) are NOT rental activities under §469 — material participation alone unlocks non-passive losses.
The Augusta Rule: rent your primary residence to your own business up to 14 days/yr at market rate — 100% deductible to biz, tax-free to you.
Keep personal use under 14 days OR 10% of rental days to preserve STR loss deductibility; over triggers vacation-home rules.
STRs providing hotel-like services (daily cleaning, meals, transport) move to Schedule C — SE tax + QBI eligible.
Airbnb/VRBO often collect + remit TOT for you — exclude from gross rental income; save on state income tax base.
Lease a unit long-term ($2K/mo), furnish, list as STR for $5K/mo — no property purchase required.
Combine §280A(g) 14-day rental + STR cost seg + material participation for cascade of tax benefits on same property.
Exchange appreciated LTR into an STR — defer cap gains, immediately unlock STR loophole + cost seg on new basis.