Is Using Short-Term Rentals to Reduce High W-2 Income a Real Thing?

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Hi everyone,

I have heard that using short-term rentals can help reduce high W-2 income for tax purposes. Is this true? How does it work?

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Are you not aware that residential real estate does not have a lot of stuff eligible for shorter depreciation, especially bonus depreciation which gives you that large first-year deduction?

Working with an assumption that all the rules are followed, short-term rental, material participation then losses are not passive and can offset W-2 income. The actual size of the benefit though is generally not what I call “huge” and it is more of a deferral.

The main purpose of doing business, rental, or investment is to make money not to pay less taxes, and anyone who starts with a premise of tax savings vs making money is letting the tail wag the dog.