Reducing a Seven-Figure W-2 Tax Bill Using Short-Term Rental Losses and Accelerated Depreciation
$286,400
Estimated Annual Tax Reduction
35.8% → 24.1%
Estimated Effective Federal Tax Rate
$1,210,000
Total Annual Income
Client Profile
Corporate executive with high W-2 income and one short-term rental property acquired during the year.
W-2 Income $980,000
STR Gross Income $230,000
STR Net Income Pre-Planning $110,000
Core Strategy
Short-term rental material participation allowed losses to be treated as non-passive.
Implementation Highlights
• Average guest stay under 7 days
• 250+ hours of documented participation
• Cost segregation on STR
• Bonus depreciation applied
Key Results
Accelerated depreciation created $420,000 of first-year deductions.
$420,000 × ~38% blended marginal rate ≈ $159,600
Additional STR reclassification and expense timing reduced taxable W-2 exposure further.
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