STR Tax Loophole Calculator

1. Guest stays

Nights rented to guests in 2026

Number of separate guest stays (bookings)

Days you or family used the property personally

I provide significant personal services (daily housekeeping, meals, concierge) beyond what a long-term landlord provides

Average stay = total rental days ÷ number of stays. Cleaning between guests and routine repairs are not significant personal services.

2. Your participation

Your hours of work on the rental in 2026

Your spouse's hours (they count as yours)

Total hours by everyone else (cleaners, co-host, manager)

Hours by the single busiest other person

I make the management decisions (approve guests, set rates, approve repairs) — active participation

Count real work on the rental. Time spent as an investor (reading statements, monitoring finances) does not count.

3. The property and the cost segregation study

Purchase price of the property ($)

Land share of the price (%)

Month placed in service (available to rent)

Building recovery period

Share of building basis a cost segregation study reclassifies to 5/7/15-year property (%)

Furniture, appliances and equipment bought for the rental ($)

Cost of the cost segregation study ($)

Net operating income before depreciation ($; negative if expenses exceed rent)

Assumes the property was acquired after January 19, 2025 and placed in service in 2026, so reclassified property gets 100% bonus depreciation.

4. Your tax picture

Filing status

Modified adjusted gross income before this rental loss ($)

Marginal federal income tax rate (%)

Marginal state income tax rate (%), if your state follows bonus depreciation

Other passive income this year ($)

Other net business income this year ($, if positive)

Your at-risk amount in the rental ($, leave blank for no cap)

The excess business loss limit is $256,000 for single and $512,000 for joint filers in 2026. Other net business losses are not modelled; enter 0.

Result

Loss usable in 2026	No study	With cost segregation

What this does not cover

Federal rules only, one year. Figures are 2026 federal rules verified against IRS Publications 925 and 527, Treasury Regulation 1.469-5T and Rev. Proc. 2025-32. States often differ.
Material participation tests 1-3 only. Tests 4-6, the facts-and-circumstances test and real estate professional status are not computed.
Bonus depreciation for property acquired after January 19, 2025. Earlier acquisitions keep the phase-down rate, and a study's reclassified share is taken as 100% bonus in year one.
Rough limits. The at-risk cap is the amount you type, the excess business loss is charged first to this rental, and at sale the depreciation is recaptured.

Common questions

What is the short-term rental tax loophole?

If a rental's average guest stay is 7 days or less it is not a rental activity under the passive-loss rules, so it is passive only if you fail to materially participate. Materially participate and the loss, including bonus depreciation from a cost segregation study, is non-passive and can offset wages and other income, subject to the at-risk, basis and excess business loss limits.

How is the average guest stay calculated?

Divide the total number of days in all rental periods during the year by the number of rentals (IRS Publication 925). 210 rented days over 60 stays is an average of 3.5 days. The threshold is 7 days or less, or 30 days or less if you also provide significant personal services.

What counts as material participation for a short-term rental?

You need to meet one of the seven tests in Treasury Regulation 1.469-5T. The three this tool computes are: more than 500 hours; your participation is substantially all of everyone's participation; or more than 100 hours and not less than any other individual, including cleaners and managers. Your spouse's hours count as yours. Keep a contemporaneous time log.

Does the $25,000 rental loss allowance apply to a short-term rental?

Only if the property is still a rental activity. The $25,000 allowance (for active participation) phases out by 50 cents per dollar of modified adjusted gross income between $100,000 and $150,000 and is not indexed for inflation. IRS Publication 925 limits it to rental real estate activities, so a short-term rental with a 7-day average that fails material participation does not get it.

How much can a cost segregation study add in the first year?

It reclassifies part of the building basis into 5, 7 and 15-year property, which qualifies for 100% bonus depreciation when the property was acquired after January 19, 2025. The rest of the building is depreciated straight-line over 27.5 years (39 if the property is treated as nonresidential transient lodging) with the mid-month convention.

What limits can stop the loss from offsetting my other income?

Even a non-passive loss is subject to the at-risk and basis limits and to the excess business loss limit, which for 2026 is $256,000 for single filers and $512,000 for joint filers. Any excess becomes a net operating loss carryforward. A passive loss that cannot be used is suspended and carried forward.

Is this tax advice?

No. This tool applies published 2026 federal rules to the numbers you enter and cannot judge your facts, your records or how the IRS would view them. The short-term rental loophole is audited for time logs and average stays. Review the result with a qualified tax professional before you file.