RENT Magazine Q4'23

TAX BENEFITS STRS GET: THE 100- HOUR RULE Real Estate Professional Status (REPS) offers several tax benefits, but while financially attractive, demands 750 hours annually. It's a commitment many landlords and property managers can't make. TAX BENEFITS OF QUALIFYING FOR REPS: But STRs introduce a game-changer - the 100-hour rule. The bottom line is it’s much easier to qualify for Real Estate Professional Status when you own an STR. •Your rental income is treated as active income, allowing you to deduct losses without limitation. •You can potentially avoid the 3.8% Net Investment Income Tax (NIIT).

•You can take advantage of accelerated depreciation through cost segregation.

STRS INTRODUCE A GAME-CHANGER - THE 100-HOUR RULE.

COST SEGREGATION: THE UNSUNG HERO OF STR The real wealth in STR investment, surprisingly, may not lie in the rental income. Instead, it's hidden in the nuances of cost segregation. Imagine investing in a million-dollar property. Through cost segregation you identify $250,000 of assets that can be depreciated at an accelerated rate. In the first year alone, with the right leveraging, a substantial chunk of this $250,000 can be deducted. In this scenario if you're earning $300,000 from other sources, the STR depreciation can shield a large portion of your income from taxation. And the best part? You're only committing 100 hours a year.

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