The STR Loophole — How One Property Can Save You Thousands in Taxes
If you’re a high-earning W2 employee, you know the sting of watching 30–40% of your paycheck disappear to taxes. But what if one short-term rental could change that — legally and dramatically?
This isn’t a gimmick. It’s called the Short-Term Rental Loophole, and it’s one of the most powerful tax strategies available to W2 earners who are willing to learn the rules.
Why This Works
The IRS treats most rental properties as “passive income” — meaning you can’t use losses to offset your W2 or active income. Short-term rentals, however, are different. If your average guest stay is seven days or less and you materially participate, the IRS classifies it as a non-passive business activity.
This classification unlocks one of the biggest benefits in the tax code: the ability to use depreciation losses to offset your W2 income.
The Big Win: Bonus Depreciation
When you buy a property, you can hire a cost segregation specialist to break down the building into components with shorter depreciation schedules. Using 100% bonus depreciation (recently reinstated under the OBBB), you can deduct a massive portion of your purchase price in year one.
Example Scenario
- You earn $500,000/year at your W2 job.
- You buy a $500,000 short-term rental.
- Cost segregation + bonus depreciation = $150K–$200K in paper losses in year one.
- Those losses offset your W2 income, potentially saving you $55K–$75K in taxes.
All while owning an appreciating, income-producing asset.
How to Qualify
To use this strategy, you must:
- Keep average guest stays under 7 days.
- Meet one of the IRS’s material participation tests (e.g., 100+ hours and no one works more hours than you on the property).
- Keep detailed records of your time and activity.
The Catch
It’s 100% legal — but only if you follow the rules. If you get audited, you’ll need clear proof you met the participation requirements.
The Next Step
This is where ViaSTR comes in. We give you:
- Step-by-step guides for setting up your STR business correctly.
- Referrals to vetted CPAs who understand the loophole.
- Tools to track your hours and document compliance.
Join our free membership to access checklists, vendor referrals, and real-world examples from other W2 earners who are using this strategy right now.
