Understanding STR Taxes: The 14-Day Rule, Deductions, and What Your CPA Might Be Missing

This article is not tax advice — consult a qualified CPA with specific STR experience. That said, understanding the framework before your CPA conversation ensures you're asking the right questions and not leaving money on the table.

The 14-Day Rule: Your Personal Use Floor

If you rent your property for fewer than 15 days per year, the income is tax-free under IRS rules — and you cannot deduct rental expenses against other income. If you rent for more than 14 days, all rental income is reportable but you can deduct all rental expenses (cleaning, mortgage interest if applicable, insurance, platform fees, depreciation).

Depreciation: The Deduction Most Operators Don't Fully Use

If you own the property, you can depreciate the structure (not land) over 27.5 years for residential real estate. More importantly, STR property may qualify for shorter depreciation periods on furnishings, appliances, and certain improvements — sometimes as short as 5 years via cost segregation analysis. The tax savings from cost segregation on a property with $200,000 in improvements can exceed $20,000 in Year 1 alone.

Active vs. Passive Income Classification

STR income can potentially be classified as active rather than passive if you meet the "material participation" tests — more than 500 hours/year of active management, or more hours than any other person. Active classification allows STR losses to offset W-2 or business income, a significant benefit for operators with paper losses from depreciation.

What Your CPA Might Be Missing

Working with a general CPA who handles a few STR clients as part of a broader practice is very different from working with a CPA who specializes in STR operators. STR-specialized CPAs know about cost segregation, know how to document the material participation tests, and stay current on platform-issued 1099-K reporting requirements. The fee difference is real but typically pays for itself many times over.