How Cost Segregation Can Widen the Short-Term Rental Loophole

Owning and renting real estate can be financially lucrative, but when it comes to the classification of rental activities for tax reporting purposes, not all scenarios are created equal. The nature of the taxpayer’s participation in the rental activity can make a material difference in the way the income is treated, and a cost segregation strategy will enable full advantage of tax rules for property getting through the short-term rental loophole.

The Seven-Day Rule and Active vs. Passive Income

If the property owner by virtue of the rental activity meets just one of seven “material participation” tests (discussed below) and ...