Turning an Airbnb into a Tax Advantage: Michelle and Zach's Journey

When Michelle, a physician, and her husband Zach, a finance professional, joined us in early 2024, they sought ways to optimize their taxes amidst demanding careers and a busy family life. With three kids and a combined W-2 income of $450,000, they also earned an extra $50,000 from an Airbnb in Arizona—Michelle's former primary residence.

Seeing an opportunity to leverage their Airbnb income for tax savings, we developed a targeted strategy for them:

1. Short-Term Rental Eligibility: We confirmed the Arizona property qualified as a short-term rental under IRS guidelines, unlocking key tax benefits.
2. Material Participation Compliance: To meet IRS standards and avoid audit risk, we guided Michelle and Zach in documenting their involvement with the property.
3. Accelerated Depreciation: By performing a cost segregation study, we applied bonus depreciation to generate paper losses that offset W-2 income.
4. Thorough Tax Filing: We ensured they captured all deductions and credits, maintaining full compliance and maximizing their savings.

This tailored approach allowed Michelle and Zach to offset $70,000 against their W-2 income in the first year, significantly reducing their tax burden and giving them peace of mind to focus on family and careers. Their story highlights the power of proactive planning and tailored tax strategies to create real financial impact.