Short-term rentals like AirBnb are becoming increasingly popular with taxpayers who invest in real estate.
For many taxpayers, the appeal of these properties is the flexibility and cash flow potential. However, there may be an overlooked third tax benefit.
In many situations these short-term rentals may not qualify as a rental activity to the IRS, and that may offer a big tax break.
While many rental activities generate losses, this can leave taxpayers facing the frustrations of not always getting to deduct those losses right away due to the passive activity limitations.