Tax Tips for Short-Term Rental Owners with Ryan Bakke

Tax Tips for Short-Term Rental Owners with Ryan Bakke

podcast tax Feb 16, 2023

It's hard to not get the real estate investing bug at some point, it feels like everyone is investing in property and short-term rentals. There's just an overall buzz around real estate right now as an investment! I think as more people are wondering what's going on with the economy, interest will pique even further. Maybe you're looking for places to put your wealth and real estate is on your radar...

That's why I've brought Ryan Bakke on the show today. Ryan owns several businesses and works in the real estate field. He owns the Real Estate CPA firm where he advises over 150 clients on real estate tax strategies. His core mission is to help people build wealth, have an impact, and change their family tree.

We're chatting about why real estate investing is so popular, especially short-term rentals. There are several tax benefits and tax strategies that can help you keep more of what you earn as an owner of short-term rentals! We're diving into depreciation, whether you need the Schedule E or Schedule C, and commonly missed deductions!


"I learned pretty early that I wasn't the smartest person in the room, but if I studied enough and I held myself up to that standard, I could become that person that people look up to."


In this episode, you will learn the following:

1. How did Ryan Bakke become the youngest CPA in Illinois?
2. What are the tax benefits of investing in short-term rentals?
3. How can investors maximize their tax benefits in different real estate markets?


What you'll hear in this episode:

  • What is a short-term rental and why has it become so popular?
  • What is material participation? What are the seven different tests?
  • The litmus test for short-term rentals.
  • What are the tax advantages of owning a short-term rental and who should be looking at these types of opportunities?
  • What are the rules around staying in a rental property for yourself?


Here are some brief snippets from this episode:

Short-term rentals by far cash flow or make more money than your typical long-term rental. Some of them are easier to finance too. And the cherry on top is you can buy these houses in places that you like to go and like to vacation at.

Real estate professional status allows people who are full-time in real estate to use their rental losses.

There are seven different ways that you're able to achieve what's called material participation. 

The strategy is not for everybody, depending on, again, your income. The higher your purchase price is, the more likely you're going to want to do it. Understand how depreciation is calculated. Double-check with your CPA or tax advisor before you do a transaction like that.

You should never invest in real estate solely for tax benefits. 

Is it someone who wants cash flow versus appreciation versus what their goal is? Who is the short-term rental good for and how can it save them money in taxes? Knowing what your investing pillar is, is so important.

The biggest one is understanding the difference between earned income and what's called passive income. Any activity in which you don't materially participate in is considered passive. 

There's a code called section 288 that talks about what are you able to do in a rental property. You can stay for up to 14 days or up to 10% of rental days. 

The best place to start is actually pull up where real estate is reported, the Schedule E of the 1040. There are a lot of costs that show up right on that form that I see people miss. 

Short-term rentals only go on Schedule C if what are called substantial services are provided. If you provide those substantial services, you are going to be triggered with self employment tax. 


Related episodes:

How Do I Use the S Corp Strategy?

Deducting Business Travel

Questions You MUST Ask Your Accountant Before Signing a Return



Follow Ryan on IG @learnlikeacpa

Check out Ryan's Short-Term Rental Tax Training

His Tax Strategies for Real Estate Investors group on Facebook

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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.