How high income earners save on their taxes in 2025 with Short Term Rental investment properties

If you make great money but feel crushed by taxes, there’s a smart way to turn that around, and it’s completely legal. In 2025, owning short-term rental (STR) properties can unlock powerful tax breaks that can save you tens or even hundreds of thousands of dollars.

Here’s how it works.

Why Short-Term Rentals Are a Tax Goldmine

Short-term rentals are treated differently from long-term real estate. If you actively manage your STRs, even just for one year, you can use certain real estate tax tools to offset your W-2 or business income, not just rental income.

That’s what makes it so powerful for high earners like doctors, business owners, executives, and entrepreneurs.

The 3 Key Tools That Make It Work

1. Active Participation You need to “materially participate” in your STR business for it to count. This means you’re involved in decisions like pricing, messaging guests, or managing renovations. You don’t need to do everything yourself forever, only for the year you claim the tax benefits. I'll share our strategy below for those who want to stay passive in their investment.

2. Cost Segregation Study This is a specialized report that breaks your property into parts such as furniture, flooring, and appliances. Some parts depreciate faster, which means you get to write off more value sooner.

3. Bonus Depreciation (Accelerated Depreciation) Thanks to 2025 tax law updates, you can deduct a large portion of those costs immediately. This can create a paper loss so big that it wipes out a large part of your income taxes.

   
   

A cozy short-term rental living room with modern furnishings

Real-World Example

Let’s say you buy and furnish an STRs this year.

• You spend $800,000 total.

• After a cost segregation study, $250,000 of that could be written off in Year 1 through bonus depreciation.

• That $250,000 deduction could cut your taxes in half or even eliminate them for 2025.

  
  

Timing Matters

Here’s the best part: you only need to actively manage the rentals in the year you’re claiming the benefits.

That means a perfect strategy is to:

1. Buy, renovate, and furnish your STRs in the fall before year-end.

2. Self-manage for a few months to qualify for active participation.

3. Hand them over to a professional property manager in January.

4. Rinse and repeat to offset or delete your taxes each year!

You get the tax benefits and the passive income.

Why 2025 Is the Time to Act

• Bonus depreciation was previously only 60%, recent changes have bumped that back up to 100%!

• Real estate prices and interest rates are leveling off, opening new buying opportunities.

• You still have time to close on STRs and qualify for this year’s benefits, but the clock is ticking.

Bottom Line

If you’re a high-income earner, buying two short-term rentals this year could be the best tax move you ever make.You’ll not only build long-term wealth but also keep more of what you earn while owning assets that pay you back year after year.

Want to see how this could work for you?Book a free strategy call to learn how to structure your purchases, qualify for active participation, and use cost segregation to save big this tax season.

Book Your Call Today

Disclaimer: This content is for educational purposes only and should not be taken as tax or legal advice. Always consult with a qualified CPA or tax professional familiar with short-term rental strategies before making any investment decisions.

A beautiful short-term rental property with a welcoming entrance

Disclaimer: This information is for educational purposes only and should not be considered financial or tax advice. Always consult with a qualified tax professional before making any investment decisions.