Tax Smart Real Estate Investors Podcast
321. Does Travel Time Count Toward Material Participation?
Apr 11, 2025
In this engaging episode, the hosts tackle real estate investors' burning tax questions. They explore intriguing topics like how short-term rental losses can impact income and the details of the QBI deduction. Listeners learn about the nuances of travel time and its role in material participation, alongside strategies for navigating home improvement records. They also discuss the critical 14-day rule and the complexities of bonus depreciation. It's a treasure trove of practical advice for optimizing tax benefits in real estate!
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Quick takeaways
- Active losses from short-term rentals can offset other income if losses do not exceed taxable income, aiding tax management.
- Travel time to rental properties is generally excluded from material participation calculations, highlighting risks in tax claims.
Deep dives
Understanding Short-Term Rental Losses
Active losses from short-term rentals are directly offset against active income in the current tax year. For taxpayers who qualify for the short-term rental loophole—defined by averaging fewer than seven days per rental stay and materially participating—the losses can offset other income. If total losses exceed taxable income, any remaining losses can be carried forward to the next tax year as a net operating loss (NOL). This strategy allows real estate investors to effectively manage their tax liabilities by taking advantage of short-term rental losses.
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