Short-Term Rental “Loophole” for Real Estate Pros: One Airbnb, Less Tax
Samy Basta, CPA • October 29th, 2025
I’m a CPA. I work with builders, designers, architects, engineers, developers, property managers, and real estate tech teams. You juggle schedules, budgets, and risk. You don’t need tax jargon. You need the big picture and a clear path.
Most rentals are “passive.” Those paper losses? They usually can’t touch your salary or business profits.
Short-term rentals (STRs) are different. If your average stay is seven nights or less and you are hands‑on, the activity can be treated as non‑passive. That means your short term rental tax deductions (depreciation, furnishings, startup costs) can reduce your other income. In the right setup, that can include W‑2 wages or operating profit.
That’s the door. Walk through it with a plan.
Construction firms housing traveling crews between projects. Clean, safe basecamps that pay for themselves and cut taxes.
Interior designers and architects creating a marketable, branded stay that doubles as a portfolio piece.
Engineers and developers near job sites, stadiums, or hospital districts with steady midweek demand.
Property managers adding an owner‑operator unit that showcases operations and quality.
Real estate tech teams using a live test bed for pricing, messaging, and guest‑experience features.
If you’re paying a lot in taxes and you can operate an STR well, this is worth a look.
Short stays: Keep your average stay at seven nights or less for the year. Check it monthly so it does not creep up.
Be involved: You operate. Pricing, messaging, vendor coordination, reviews, approvals. Track your time. Calendar entries or a simple spreadsheet work.
Document participation: If you want belt‑and‑suspenders, aim to be the most involved human or log 500+ hours. Keep evidence.
Limit personal use: Personal nights can complicate things. Keep them minimal and documented.
Depreciation on building components and personal property.
Furnishings and equipment that often qualify for faster write‑offs. Think beds, sofas, TVs, small appliances, linens, kitchenware.
Interest, property taxes, insurance, utilities, cleaning, supplies, platform fees, software.
Cost segregation can move more value into shorter‑life buckets. That accelerates deductions into earlier years.
You can be cash-flow positive and still show a first-year paper loss. Paper losses lower taxes. Lower taxes free cash. Cash buys time, talent, and tools.
Tip: Coordinate your placed‑in‑service date, large purchases, and any cost segregation timing. Calendar choices change your first‑year result.
Lesson: Keep average stays short. Be obviously involved. Document hours.
Lesson: Strategy beats luck. Calendar your involvement. Shape demand to shorter stays.
Lesson: You can use help, but you still need to be the most involved person or cross a participation test.
Depending on your bracket, that’s tens of thousands saved. That could fund a project manager, equipment, or debt reduction.
This is the heart of short term rental tax deductions. The rules do not create cash by themselves. They change the timing of taxes so you keep more of your own cash in the business when it matters.
Depending on the year and your placed-in-service date, bonus depreciation can accelerate write-offs on furniture, equipment, and certain improvements. The calendar matters. Get your CPA involved before you go live to coordinate dates with your ops plan.
State rules often differ from federal on accelerated depreciation and bonus percentages. Keep separate schedules and expect timing differences. Many cities also require short‑term rental registration, transient occupancy tax, and business licenses. None of this is drama if you plan for it. Build it into your setup checklist and cash‑flow model.
For example, if you operate in San Francisco, review their short‑term rental registration and local TOT requirements before you go live.
If the city bans STRs, you hate guest messages, or you want a totally passive hold, this probably isn’t your move. Long-term rentals or triple-net deals may fit better.
If you’re thinking about using short term rentals for tax deductions, now’s the time to double-check your setup — average stay, time tracking, and how you’re running day-to-day operations. A little planning now can mean big savings later.
Short stays. Hands on. Smart timing. Do that and your short term rental tax deductions can reduce the tax hit from your work or your business. That keeps more cash in the company, where it can actually build something.
So if you want to run the numbers, talk through timing, or make sure your STR strategy fits with your bigger picture, reach out to us at Basta and Company, your Real Estate Fractional CFO in California.
We work with builders, designers, architects, engineers, developers, property managers, and real estate tech teams to make sure their tax plan actually supports their business plan. Schedule a free discovery call with me and let’s talk.
Samy Basta brings you more than 20 years experience in tax, financial, and business consulting to his role as founder of Basta & Company. His focus is primarily strategic business planning, empowering clients to set priorities, focus energy and resources, and strengthen operations. In addition, Samy and his firm provide strategic counsel, and technical insight, on a wide range of needs, including tax saving strategies, tax return compliance, as well as choice of entity.
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San Francisco, CA 94111