Ken Allen, EA

Enrolled Agent

[Ken Allen, EA @taxreliever]

Buying a short-term rental to cut your 2026 taxes? Closing by Dec 31 isn't enough.
It has to be placed in service. Furnished, ready, and available to rent.
Close Dec 30 with an empty house and the deduction may slide to 2027.
Plan the timeline now:

[Ken Allen, EA @taxreliever]

Unpopular take: the STR tax break is not passive income.
Hand everything to a full-service manager and they'll likely log more hours than you. That can kill the 100-hour test.
No material participation, no offset against your W-2.
Buy the property. Then do the work.

[Ken Allen, EA @taxreliever]

Pay what you owe. Not a dollar more. Then put the rest to work for your family, your church, your community.
Plan it before Dec 31.

[Ken Allen, EA @taxreliever]

Some believers feel guilty about tax planning. Like paying less is somehow greedy.
I get it. I don't buy it.

[Ken Allen, EA @taxreliever]

Stewardship means knowing where every dollar goes. Including the ones headed to the IRS.

[Ken Allen, EA @taxreliever]

October 15 came and went. Your 2026 return doesn't exist yet.
That's the good news.
You've got about 10 weeks to change what it says. After December 31, all I can do is report it.
Plan now. Not in April.

[Ken Allen, EA @taxreliever]

3/ The catches: you have to actually do the hours, and keep a log. It has to be placed in service this year. Depreciation can be recaptured when you sell. Your state may not follow.
74 days left in 2026. Plan before you buy.

[Ken Allen, EA @taxreliever]

1/ The STR loophole in real numbers (illustrative only, not a promise):
High earner. $500K+ of W-2 income. 35% bracket.
Buys an $800K short-term rental. Land is $150K. Building is $650K.

[Ken Allen, EA @taxreliever]

2/ A cost segregation study plus 100% bonus depreciation gives roughly $170K of year-one depreciation.
Average guest stay of 7 days or less, plus material participation, means that loss can offset W-2 income.
$170K x 35% is about $59K less federal tax this year.

[Ken Allen, EA @taxreliever]

Myth: If you skipped cost seg the year you bought your rental, you missed it.

Truth: A look-back study can catch up missed depreciation this year with Form 3115. No amended returns.

Whether it pays depends on your facts. Run the numbers first.

[Ken Allen, EA @taxreliever]

Unpopular take: Oct 15 isn't a tax deadline. It's a scoreboard.

If you're filing your 2025 return today, the score was set months ago.

Filing reports what happened. Planning decides what happens.

77 days left to shape 2026. Use them.

[Ken Allen, EA @taxreliever]

5/ Good stewardship means owning the numbers and the work, not just the asset.

Questions on whether your rentals qualify? Start at

[Ken Allen, EA @taxreliever]

1/ Cost segregation and the STR loophole get the headlines.

Material participation is what actually makes them work.

[Ken Allen, EA @taxreliever]

4/ Plan the work before you buy.

Who handles guest issues? Who decides on repairs? Who reviews the P&L?

Write it down. Track it. Your CPA will thank you at filing time.

[Ken Allen, EA @taxreliever]

The fine print matters. To use those losses against your W-2 or business income, you have to materially participate. Depreciation can be recaptured when you sell. And every property is different.
Plan it before you buy. Not in April.

[Ken Allen, EA @taxreliever]

Illustrative numbers. Not a promise.
You buy a $600K short-term rental. $100K of that is land.
No cost seg study: you depreciate $500K over 39 years. That's about $12,800 a year.

[Ken Allen, EA @taxreliever]

With one: say 25% gets reclassified to 5, 7, and 15-year property. With bonus depreciation, that's about $125K you could deduct in year one.
Same property. Same price. Different plan.