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HI 165: Short-Term Rentals & Taxes with Brandon Hall

Episode: 165

Guest: Brandon Hall

iTunes: Stream Episode

Gary Pinkerton starts off today’s show with a little news from his first short-term rental property. Fortunately it’s good news. Then, Jason Hartman talks with Brandon Hall, CPA, about short-term rentals and taxes.

If you are using your buy and hold properties as short term rentals, through a company like Airbnb, you may be required to pay an additional 15.3% self employment tax. Although it may seem like a gray area to you, the IRS considers it an active business and will take note of which schedule you are filing. Short term rentals require more of your labor and your time which rarely gets accounted for when calculating costs. Considering all the aspects of short term rentals versus long term buy and hold properties will shield you from future surprises.

Key Takeaways:

[7:02] Airbnb investors also have a 15.3% tax on active income

[8:13] Monetizing the value of your time. Automated business systems allow me manage my real estate in only 30 min per month

[11:01] It’s more time and labor intensive than a buy and hold property

[13:50] A complicated scenario in setting up short term rentals

[16:49] Short term rentals may earn more but the time is not factored in

[17:45] Schedule E or Schedule C?

[19:47] The IRS may be bringing on the audits

[21:33] A 5 year depreciation schedule

[23:05] The diminimous safe harbor

[25:23] 500 material participation is solely for rental properties

[28:06] An example of a three unit qualifier for material participation

[29:53] Long distance self management is possible and maybe easier

[31:35] Segmented depreciation, cost segregation using a sears catalog

[34:41] Feasibility studies are expensive

[36:43] Everybody needs a home office