The Strategy
The core planning here covered three areas.
First, material participation and the 100-hour rule. Because Namasi and his wife both have W-2 income, real estate professional status is generally not available. But a short-term rental sidesteps that entirely. It is not a passive activity by default, so the losses flow directly to the 1040 tax return if he meets the material participation threshold: 100 hours and no single person does more than him. His spousal hours count, and if he eventually owns more than one STR, a grouping election lets him track participation collectively across properties rather than property by property. High-income W-2 earners are exactly who this strategy is built for.
Second, cost segregation. On a $300,000 single-family STR, approximately 28% of the depreciable basis is eligible for accelerated depreciation, roughly $61,000 in the first year. At a 24% marginal rate, that is around $15,000 back in year one. When an STR and bonus depreciation work together, the first-year deduction can meaningfully offset W-2 income in a way long-term rentals simply cannot deliver without real estate professional status.
Third, entity structure. The recommended setup: each STR owned by a single-member LLC (disregarded for tax purposes), with all those LLCs rolled up under a Wyoming holding company co-owned with his wife. The HoldCo files a partnership tax return, issues K-1s, and the material participation determination happens at the 1040 level. Partnership tax returns also carry a significantly lower audit risk than a personal tax return carrying large rental deductions.
