The Short Term Show Depreciation, Documentation, and Dodging Mistakes with Brandon Hall and Nathan Sosa
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Jun 11, 2025 Brandon Hall, a tax expert from Hall CPA specializing in short-term rentals, joins Nathan Sosa to unpack the short-term rental tax loophole. They reveal how investors can offset W2 income and the importance of documentation for surviving IRS audits. The duo explores depreciation, bonus depreciation updates, and common tax traps often overlooked by influencers. Listeners will benefit from insights into effective strategies to navigate market saturation and avoid pitfalls, ensuring financial success in short-term rental investments.
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Short-Term Rental Tax Loophole
- The short-term rental loophole allows losses to offset W-2 and business income without qualifying as a real estate professional.
- Material participation with rentals having average customer use of 7 days or less makes losses non-passive and deductible against regular income.
Document Work to Survive Audits
- Keep detailed logs of time spent and all receipts to substantiate material participation for short-term rental audits.
- Prepare documentation during the year, not retroactively, to avoid trouble proving your case to the IRS.
Audit Risk Management Strategy
- IRS agents initially auditing short-term rentals often lack expertise in material participation rules.
- Effective responses steer auditors away from triggering advanced scrutiny, managing audit risk strategically.