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Say Hello to Buttercup Breeze!

Updated: Dec 4, 2023

We just closed on our newest Short-Term Rental in Pigeon Forge, TN this week. Why another short-term rental when many markets (including the Smokies) are becoming oversaturated?

  1. STRs are usually considered active businesses by the IRS when self-managed, which moves any depreciation losses to the ‘earned’ income bucket, thereby offsetting W-2 and hourly wages.

  2. Bonus depreciation has started phasing out by 20% every year, so this year we are able to take an 80% write-off of building components with a <15-year lifespan (~$120,000)

  3. We don’t have a lot of W-2 income this year, so why do we care about this write-off? This STR depreciation loss will allow us to do a Backdoor Roth IRA Conversion without paying taxes. Typically, converting from a Traditional IRA to a Roth IRA is taxed as ordinary earned income when the conversion occurs, but the bonus depreciation loss amount from the STR will offset that taxable amount. Thus, we deposited money in a Traditional IRA tax-free, let it grow over time, will roll it to a Roth tax free, let it grow some more, and then withdraw it tax free. Pretty amazing!

So yes, we’re buying it primarily for the tax benefits! We are hoping to have it up and running in June, but in the meantime you can check our other two Short-Term Rentals:

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