Tax Savings for Vacation Rental Hosts

Masterclass-Amanda & Matt

By The Hospitable Team

Navigating the world of short-term rental (STR) taxes can be equally daunting for single-property hosts and hundred-unit businesses. But it shouldn’t be a maze of confusion and missed opportunities. 

The latest Hospitable Masterclass with tax-saving experts Amanda Han and Matt MacFarland from Keystone CPA guides vacation rental hosts through the tax season with ease — whether it is the basics of correctly filing tax returns or identifying often overlooked deductions. 

From the fundamentals of taxation to advanced strategies, Amanda and Matt break down complex issues into actionable insights in the full Hospitable Masterclass!

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Best Record-Keeping Practices Are Sometimes Oldschool

While discussing tax savings might be the more enticing part of managing STR taxes, Amanda reminds us that “the less sexy part…typically the bookkeeping side” is equally important. Accurate record-keeping forms are the foundation of any tax strategy, and Amanda’s key point here is the undeniable importance of keeping receipts should the IRS ever come knocking: 

“Your receipt is ultimately going to be your insurance if you were to get audited, especially on things that are not so clear — is it business or personal? You might go to Costco to stock your rentals, but you might buy baby diapers… make sure you have the receipts,” Amanda explains.  

Matt advises keeping copies of receipts for three to four years, aligning with the IRS’ statute of limitations, though some states may require a longer period. To address any potential queries from tax authorities, it is advisable to retain records of significant expenses (say, property improvements) for the duration of property ownership.

Digital Era of STR Bookkeeping — Your Essential Software Tools

Digitizing your documentation by scanning or photographing receipts can significantly simplify your record-keeping process. Organizing these digital records by month or expense type can make retrieval and review much easier, especially come tax season.

When choosing software for record-keeping, our experts explored multiple options, and they say you don’t always have to use complex tools like QuickBooks or Stessa. Amanda and Matt emphasize leveraging detailed property management reports, just like Hospitable reports:

“Let’s say I have my Hospitable report. I export it to Excel… and then I just build upon that. So, I can consolidate that number alongside my own numbers of tax, legal, accounting, all that good stuff… and add them to create the whole picture for my tax person.”

Discover more bookkeeping software recommendations from Amanda and Matt.

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Common Taxation Mistakes You Can Avoid 

Amanda reveals, “The short-term rental tax file is probably one of the most common mistake areas that we’re seeing made not only by investors but even by accountants.”

A common misconception Amanda and Matt addressed is the belief that one must be a real estate professional to utilize vacation rental losses against W2 income. Amanda clarifies that “it’s possible for all types of investors even if real estate is just your side hustle.” This myth can lead to missed opportunities for tax savings. 

Vacation Rental Loophole You Shouldn’t Miss

When optimizing tax savings, cost segregation plays a crucial role, acting as a piece of the broader “short-term rental loophole.” This strategy involves creating tax losses without trapping them in the “passive activity loss” category.

Sounds too complicated? For hosts eager to dive deeper into the specifics of this loophole and other tax-saving strategies, Amanda and Matt offer their free downloadable tax savings toolkit

From Filling Multiple Properties to Solar Grid Write-Offs

As our webinar on tax savings unfolded, Amanda and Matt delved into more complex terrain, stimulated by a very dynamic Q&A session with Hospitable hosts.  

The discussion spanned wide — from navigating the intricacies of various tax forms to leveraging solar grid write-offs — and presented a goldmine for anyone looking to elevate their tax savings game.

Don’t miss the chance to tune up your approach to STR taxes! Watch the full Masterclass now and embark on your journey to unlocking advanced tax savings today.

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