FIRST YEAR · 2026
$205,647
Illustrative total tax savings
THE TAX STRATEGY
Understand the potential.
See the assumptions.
Qualifying short-term rental losses may offset W-2 income. The property, your participation, depreciation and loss limits all matter.
THREE YEARS · 2026–2028
$370,570
Illustrative total tax savings
One property. NYC-resident joint filers.
Federal, New York State and NYC income tax. Includes relief from cash operating losses. Tax savings are not investment profit.
Read the full exampleWHY A SHORT-TERM RENTAL
Depreciation creates the loss.
Your participation matters.
Ordinary rental losses are often passive. A qualifying short-term rental, operated with material participation, can receive nonpassive treatment. That is the potential route from property depreciation to a W-2 income offset.
Keep stays short.
An average guest stay of seven days or less can take the activity outside the rental-activity definition for passive-loss purposes. Material participation is still required.
Be the operator.
Under one test, qualifying owner participation—including a spouse’s qualifying work—must total more than 100 hours per tax year and at least as much as any other individual’s participation. AI records participation from activity evidence, with owner review and approval. Your CPA assesses the actual work and records.
Accelerate depreciation.
A cost-segregation study identifies eligible shorter-life components. Qualifying components may receive 100% bonus depreciation; land and the entire building do not.
Apply the loss correctly.
Eligible nonpassive losses may offset W-2 income, subject to basis, at-risk and excess-business-loss limits. State rules can differ. New York generally adds back federal bonus depreciation and uses its own schedule; NYC resident tax reflects that adjusted base. Your CPA determines what is deductible and when.
Tax framework: IRS Publication 925 · IRS Publication 946 · 2026 loss threshold. Tax treatment depends on your facts.
ILLUSTRATIVE $2M PURCHASE · NYC RESIDENTS · MARRIED FILING JOINTLY
See the tax potential.
Understand the cash cost.
ANNUAL CASH REQUIREMENT
~$119,000
Before tax and AIstat fees. About $120K of annual rental revenue against $239K of property and financing costs.
| Purchase price | $2,000,000 |
|---|---|
| Portfolio-backed line / mortgage | $500K / $1.5M |
| Cash down toward purchase price | $0* |
| Full-year rental revenue | $120,000 |
| First-year federal depreciation | $450,000 |
| First-year NY / NYC depreciation | $100,560 |
| First-year eligible federal loss | $509,425 |
| First-year federal tax savings | $188,487 |
| First-year NY State tax savings | $10,959 |
| First-year NYC resident tax savings | $6,201 |
| Total first-year tax savings | $205,647 |
| Total tax savings over 3 years | $370,570 |
*0% cash down means the purchase price is funded with debt, including the down payment borrowed against eligible investments. Closing and launch costs, reserves and ongoing cash requirements still apply. Lender approval is required; securities may be sold following a collateral call.
Tax savings over three years
One property held throughout. Federal 37%, NY State 6.85%, NYC 3.876%; rates held constant for illustration. NYC is the owner’s residence; the property example is in Florida.
| Income tax | Year 1 2026 | Year 2 2027 | Year 3 2028 | 3-year total |
|---|---|---|---|---|
| Federal tax savings | $188,487 | $54,631 | $54,631 | $297,748 |
| New York State tax savings | $10,959 | $19,689 | $15,859 | $46,506 |
| NYC resident tax savings | $6,201 | $11,141 | $8,974 | $26,315 |
| Total tax savings | $205,647 | $85,460 | $79,463 | $370,570 |
Totals include approximately $228,764 attributable to depreciation and $141,806 from cash operating losses. They are not an investment return. Rounding may affect displayed sums.
Read the assumptions and limits
A $2M property with 22% allocated to nondepreciable land; 28% of building basis ($436,800) allocated to eligible short-life components. The illustration assumes eligible acquisition and placement in service on July 1, 2026, 100% federal bonus depreciation on those components, a 39-year building schedule and the mid-month convention. The actual study, classification and tax eligibility must be confirmed by your CPA.
New York generally adds back federal bonus depreciation. This illustration uses a simplified five-year MACRS schedule (20%, 32%, 19.2%) for the entire reclassified slice; the actual mix of five-, seven- and fifteen-year assets changes these amounts. NY and NYC depreciation is $100,560, $168,576 and $112,666 across the three years.
Household: married filing jointly, full-year NYC residents, $1.4M annual W-2 income, sufficient basis and at-risk amounts, no personal use, eligible nonpassive treatment each year and no other business income or loss. The $509,425 first-year loss is below the 2026 $512,000 joint-return excess-business-loss threshold, so this base case has no loss carryforward. The financial model applies the excess-loss and 80% NOL limitations if relevant inputs change.
Six months of operations are modeled in 2026: $60,000 revenue and $119,425 costs, leaving a $59,425 cash shortfall before AIstat fees. Each later year uses $120,000 revenue, $238,850 costs and a $118,850 cash shortfall. This simple proration does not forecast seasonal revenue. The three-year cash shortfall is $297,125 before tax and AIstat fees.
The $500K portfolio line uses an illustrative 4.62% rate and the $1.5M interest-only mortgage uses 7.50%; neither is a current quote. Optional financing coordination is provided by a third-party mortgage broker licensed in your state. The broker coordinates lender applications and explores available rates and terms. No preferential rate or loan approval is guaranteed. Portfolio-backed credit can be callable, variable-rate and subject to forced liquidation.
This is a marginal-rate illustration, not a complete tax return. Rates are held constant through 2028. It excludes incremental federal SALT effects, tax treatment of AIstat fees, closing and launch costs, future appreciation, sale proceeds and depreciation recapture. A future sale can reverse part of the tax benefit. Tax savings do not establish that an investment is profitable.
Sources: IRS bonus depreciation guidance · 2026 loss threshold · NY depreciation schedule · 2026 NY State and NYC rates · NOL limits.
A HOME YOU MAY ALSO WANT TO ENJOY
Personal use deserves
its own plan.
Discuss up to 14 personal-use days with your CPA before you reserve dates.
For a dwelling unit, the IRS residence test is generally triggered when personal use exceeds the greater of 14 days or 10% of days rented at a fair rental price. This is not a blanket allowance for unchanged deductions.
Even limited personal use generally requires an allocation between rental and personal expenses. Family stays and below-market stays can count as personal use. Residence treatment can restrict rental losses.
The savings example on this page assumes no personal use. Your CPA should recalculate the result for your actual plans, use and property classification.
Cash flow comes first.
Model the property’s cash requirements and reserves alongside any potential deductions.
Depreciation changes timing.
An accelerated deduction may lead to tax on sale. Review your holding period and exit with your CPA.
Your facts determine the result.
An hours target, a contract or a software record alone does not establish tax eligibility.
A CONVERSATION BEFORE A COMMITMENT
Let’s start with you.
Your goals. Your preferred places. Your capacity to participate.