If you have a highly successful dental practice, one of your key pain points will be rising taxes. One unique strategy that can be used to lower the overall family income is the STR strategy.
In this strategy first you purchase a home and then list it on Airbnb or a similar platform where you rent the home for on average 7 days or less to each guest.
Next you materially participate in all of the management and maintenance. (You can’t hire a management company)
Once you have your rental setup, you then complete a Cost Seg Study which will give you audit proof backup on how much of the home purchase price you can write off using bonus depreciation.
Lastly you write off allowable bonus depreciation which will generate a large loss. You then take that loss against your dental practice income on your personal tax return and you have effectively saved tens of thousands on taxes!
Key Points to Remember and Take Away
- Don’t just buy a property for tax write off purposes, make sure it makes sense
- This strategy works best if the total investment is 500k or higher, because $500k investment will yield approximately $100k in tax deductions which will help lower taxes by $20k-$30k
- Bonus Depreciation is phasing away so this strategy makes less sense in 2024 and later years
- Your Rental must be short term- so tenants are there 7 days or less on average, you cant have long term tenants and use this strategy
- This is a complex strategy so talk to your tax advisor prior to trying to implement!
- If you are part of our Dental Practice Accounting and Tax Savings Program, we will already be discussing this option with you based on your finances and goals during our Year and Tax Planning Meeting
For questions please feel free to contact one of our Dental CPA team members by calling 713-396-3172 or emailing omar@virjeeconsulting.com
Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.
