Legally Minimizing Your Tax Burden as an STR Investor
Short-term rentals offer some of the most powerful tax advantages in real estate. This chapter covers the specific deductions, depreciation strategies, and entity structures that STR investors use to legally reduce their tax burden — and the mistakes that trigger IRS audits.
Cost segregation study: accelerates depreciation on personal property components (appliances, flooring, fixtures). Can generate $20,000–50,000 in first-year deductions on a $300K property.
The STR tax loophole: properties rented for an average of 7 days or less qualify as a 'business' not a 'rental' — enabling different deduction rules.
Transient occupancy tax (TOT): most markets require you to collect and remit 8–15% occupancy tax. Airbnb handles this automatically in most markets.
Deductible expenses: mortgage interest, property taxes, insurance, repairs, cleaning, supplies, software, professional services, and a portion of your vehicle if used for the business.
Audit red flags: claiming 100% business use of a property you also use personally, large losses in year 1, and inconsistent income reporting across platforms.