I’m thinking of purchasing a property and starting a short term rental business using Airbnb. I want to stick within an hour drive of my own primary residence.
The purchase price would be 250k+ In addition spending about 15k in furnishing the property.
I plan to be active in managing and operating the rental. My only other source of income is a w2 salary employment . I might have to take out taxable IRA early distribution as well to make this work.
I want to do cost segregation on the purchase property to max out the amount I can take for bonus depreciation and also take bonus/ full depreciation on assets I would purchase to furnish the property.
I don’t plan on executing all this until 2nd half of year.
my questions:
1. If I do this my understanding is I would be able to take all the first year bonus depreciation to offset my w2 wages and ira distribution that is taxable (but still pay10% penalty). Is this correct?
2. If let’s say 2023 or 2024 I convert my short term rental to long term rental what implications would I have when it comes to the depreciation aspect.
3. what other considerations am I missing here?
in short, it seems that starting out as short term rental is an advantage for me due to the huge depreciation amounts I would get in year 1 and the offset of the wages and ira tax. my marginal tax rate is 22%. I don’t qualify for real estate professional status.
