AE Tax Advisors

I own a vacation rental in downtown Charleston that I self-manage. I handle guest communication, cleaning coordination, maintenance, and pricing myself. Despite spending hundreds of hours managing the property, my old CPA treated the income as passive and would not let me use the depreciation losses against my other income.

AE Tax Advisors explained the short-term rental rules to me in detail. Because my average rental period is well under seven days and I materially participate in the management, the property does not fall under the standard passive activity rules. The losses can be treated as non-passive and used against my W-2 income.

Once we established the proper classification, they performed a cost segregation study on the property. The vacation rental setting meant there were plenty of components eligible for accelerated depreciation -- high-end furnishings, kitchen equipment, outdoor living spaces, decorative landscaping, hardscaping, security systems, and specialty lighting. The reclassified amount was significant for a property of this size.

The accelerated depreciation flowed through as a non-passive loss and offset a meaningful portion of my W-2 income. Total tax savings: $68,000.

The AE Tax team was patient and thorough throughout the process. They helped me set up a time tracking system for my management hours and provided documentation templates for everything from guest communication logs to maintenance records. If the IRS ever questions my material participation, I have rock-solid records.

For any vacation rental owner who self-manages, the STR strategy combined with cost segregation is a must. AE Tax Advisors knows exactly how to make it work.