Tax Q&A for Real Estate Investors: STRs, Cost Seg, Grouping Elections & More

Summer is in full swing, and that means it’s the perfect time to check in on your tax strategy. In this episode of the Tax Smart REI Podcast, hosts Thomas Castelli and Ryan Carriere, CPA, take questions directly from their community, covering some of the most common and complex scenarios real estate investors are navigating right now. From entity structuring to retroactive cost segregation, here’s a breakdown of the key takeaways.

Can I Transfer a STR to an LLC Without Changing the Mortgage?

Short answer: Yes, but be cautious.

You can move the deed to an LLC using a quitclaim deed, but if there’s a mortgage in your personal name, notify your lender to avoid triggering the due-on-sale clause. Some investors skip notifying the bank, but that carries risk.

You can then use the LLC to open a bank account or credit line for the STR. From a tax perspective, the setup won’t change your deductions, but legal exposure and financing terms may be affected.

Grouping Elections: Should STRs Be Included with LTRs?

Answer: No.

STRs are not treated as rental activities under the tax code and cannot be included in the -9 election used to group long-term rental properties for real estate professional status (REPS). If you’re pursuing the STR loophole separately, keep those time logs distinct. You can only group STRs with each other under a -4 election.

Is My Property Still “Placed in Service” If It Had Non-Paying Tenants?

Yes.

Even if a tenant isn’t paying rent, as long as they’re physically occupying the property, it’s still considered placed in service. That means you’re eligible to treat certain costs as repairs and maintenance if they qualify under safe harbor or tangible property regulations. If not, the expenses may need to be capitalized and depreciated.

Can I Take Bonus Depreciation in 2025 for a Property Placed in Service in 2022?

Yes, with a catch.

You must use Form 3115 and a 481(a) adjustment to “catch up” on the depreciation you should have taken in 2022. Even though the cost segregation study was done in 2025, bonus depreciation eligibility is based on when the property was placed in service. In this case, the full 100% bonus depreciation still applies (since it was 2022), but you’ll claim it on your 2025 tax return unless you amend prior years.

Can Airbnb Income Be Run Through a Corporation for Solo 401(k) Contributions?

Not directly.

Rental income, including Airbnb income, is generally not subject to self-employment tax and doesn’t qualify as earned income for retirement contributions. Running it through a corporation doesn’t change that. However, if you provide substantial services, it may be reclassified as business income, making it eligible for solo 401(k) contributions.

When Can I Deduct a Conference Paid in the Prior Year?

If you’re on the cash basis and your business was in operation in 2024 (when the payment was made), you can deduct it that year, even if the conference happens in 2025. If the business wasn’t running yet, it may qualify as a startup cost.

Can I Use Time on a 50/50 CRE Deal Toward REPS Hours?

Yes, assuming it’s a rental property (not a flip or development project). You can group time across properties using the -9 election, and managing a 50/50 deal counts toward material participation hours if you’re actively involved.

Bonus Depreciation on Cost Seg for a Medical Office in 2023?

You can still claim 80% bonus depreciation (the rate for 2023) if you complete the cost seg study in 2024. Again, use Form 3115 and the 481(a) adjustment to apply it retroactively. Alternatively, if you haven’t filed 2023 yet, you could amend and take the bonus depreciation in that year directly.

Final Thoughts

Real estate tax planning isn’t just about filing returns. It’s about using strategy year-round to capture deductions, manage risk, and position your investments for success. Whether you’re planning to restructure your STR, exploring REPS, or thinking about retroactive cost seg, it’s worth consulting a knowledgeable CPA to ensure you’re making informed decisions.

Book a free discovery call with our team.

Disclaimer: This podcast summary and transcript were partly generated and may contain some errors or miss key points from the audio recording.