What’s the flat-rate bonus tax in 2025?

It’s currently 22% federally for bonuses under $1 million. This calculator uses the latest IRS guidance for your estimate.

What is the aggregate method?

It’s when your employer adds your bonus to your regular paycheck and withholds taxes based on your combined total income. This often results in higher withholding than flat-rate.

Can I reduce the taxes on my bonus?

Yes—with proper planning. Contributions to a Solo 401(k), DB plan, or timing strategies can all reduce your taxable income.

What should I do after I get my estimate?

Book a call with our team and we’ll help you plan how to time or structure your bonus for maximum after-tax value.

SHORT-TERM RENTAL TAX CALCULATOR: DISCOVER YOUR SAVINGS POTENTIAL

The short-term rental tax loophole represents one of the most powerful tax strategies available to high-income earners in 2026. Unlike traditional rental properties, short-term rentals offer a unique opportunity to offset your W-2 income with substantial depreciation deductions without needing to qualify as a real estate professional. This IRS-approved strategy allows you to materially participate in your rental property and use the resulting tax losses to reduce your ordinary income, potentially saving tens of thousands of dollars annually.

Understanding how this strategy works requires careful analysis of your specific situation, including your W-2 income, filing status, state tax rates, and property details. The STR loophole combines accelerated depreciation methods, material participation requirements, and strategic property management to create significant tax advantages that traditional long-term rentals cannot provide. By meeting the material participation threshold of just 100 hours annually, you can transform your rental property from a passive investment into an active business that generates substantial tax deductions.

The 2026 tax landscape makes this strategy particularly compelling. While bonus depreciation has decreased to 20% for properties placed in service in 2026, the combination of regular depreciation, cost segregation studies, and the ability to offset W-2 income still creates powerful tax savings opportunities. For high earners in states with significant income tax rates, the combined federal and state tax savings can exceed 40% of the depreciation deduction, making the STR loophole one of the most effective wealth-building strategies available.

Calculating your exact savings potential requires analyzing multiple variables simultaneously. Your property’s purchase price, land value, furnishings cost, rental income, operating expenses, and hours spent managing the property all factor into the final calculation. Additionally, your state’s tax treatment of rental losses, your marginal tax bracket, and your filing status significantly impact your net tax benefit. Our comprehensive calculator accounts for all these factors to provide you with an accurate estimate of your potential tax savings.

How it works

Step 1: Acquire a Short-Term Rental Property

Purchase a qualifying property and furnish it for short-term guests The first step in leveraging the STR loophole involves acquiring a property suitable for short-term rentals. This could be a vacation home in a popular tourist destination, a property near major attractions, or even a well-located urban apartment. The property must be available for rent to guests for periods of 14 days or less on average, which qualifies it as a short-term rental under IRS regulations. You will also need to furnish and equip the property appropriately for guest stays, as these furnishings and equipment qualify for accelerated depreciation methods that enhance your tax benefits.

Step 2: Materially Participate in Your Rental

Spend at least 100 hours annually managing your STR property Material participation is the key that unlocks the STR loophole's power. Unlike traditional rental properties, which are automatically classified as passive activities, short-term rentals can be treated as non-passive if you materially participate in the business. The IRS requires that you participate more than 100 hours during the year, and that no one else (including property managers) participates more hours than you do. Qualifying activities include guest communication, property maintenance, marketing, bookings management, and strategic business decisions. By meeting this threshold, you convert your rental from a passive investment into an active business, allowing you to offset your W-2 income with rental losses.

Step 3: Generate Tax Deductions Through Depreciation

Use accelerated depreciation to create substantial tax deductions Once you have established material participation, you can leverage accelerated depreciation methods to generate significant tax deductions. A cost segregation study identifies components of your property that can be depreciated over shorter timeframes than the standard 27.5-year residential rental schedule. Personal property items like furniture, appliances, and equipment can be depreciated over 5-7 years, and in 2026, you can still claim 20% bonus depreciation on qualifying assets. These accelerated deductions create paper losses that offset your W-2 income, reducing your overall tax liability while your property continues to generate rental income and potentially appreciate in value.

Need Professional Tax Help?

Connect with Uncle Kam’s expert tax professionals for personalized tax strategies and planning.

Review your results with a tax professional to confirm whether an S-Corp is the right move for your business. If the numbers show potential savings, the next step is validating them with an expert. A personalized review can help confirm whether these estimates apply to your specific situation.

Why Use This Calculator?

Frequently Asked Questions

What is the short term rental loophole?

The short-term rental tax loophole is an IRS-approved tax strategy that allows property owners who materially participate in their short-term rental business to use depreciation losses to offset their W-2 income and other active income. Unlike traditional rental properties, which are classified as passive activities and can only offset passive income, short-term rentals can be treated as non-passive businesses when the owner meets material participation requirements. This classification allows you to deduct rental losses against your ordinary income, potentially saving tens of thousands of dollars in taxes annually.

How many hours do I need to spend on my STR to qualify?

To qualify for material participation in your short-term rental, you must spend more than 100 hours during the tax year on rental activities, and no other individual (including any property manager) can spend more hours than you do. Qualifying activities include guest communication, property maintenance, cleaning coordination, marketing, pricing strategy, bookings management, and business planning. It is essential to maintain detailed records of your time spent on these activities, as the IRS may request documentation to support your material participation claim.

What is bonus Depreciation and will it help my savings?

Bonus depreciation is a tax provision that allows you to deduct a significant portion of qualifying property costs in the first year of service, rather than spreading the deduction over many years. For properties placed in service in 2026, the bonus depreciation rate is 20%, down from 60% in 2024 and 40% in 2025. This means you can immediately deduct 20% of the cost of qualifying personal property items like furniture, appliances, and equipment. While the rate has decreased, bonus depreciation still provides substantial first-year tax benefits when combined with regular depreciation and cost segregation strategies.

Can i combine a STR loophool with other Tax Strategies?

Yes, the STR loophole can be combined with several other tax strategies to maximize your overall tax savings. Many investors use the STR strategy alongside S-corporation election for their other businesses, qualified business income (QBI) deduction planning, retirement account contributions, and charitable giving strategies. Some investors own multiple short-term rentals to scale their tax benefits, while others combine short-term and long-term rental properties to balance cash flow with tax advantages. The key is working with a tax professional who understands how these strategies interact and can design a comprehensive tax plan tailored to your specific financial situation.

How LLC Owners Save on Taxes in 2026

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