Rental Property Tips, Tricks, And Hacks

By Jason Watson, CPA
Posted Sunday, October 5, 2025

Coming off the previous rental property tax strategy section where we focused on a handful of real estate tax strategies, the following are smart moves and related considerations real estate investors use to get the most out of their rental properties, tax deductions, and cash flow while minimizing risk. Man, that was a long sentence.

Each tip, trick or hack has just a few words describing the move. We are following the mini skirt rule- short enough to keep it interesting, but long enough to cover the topic. Most of these are expanded in various sections of our book. Also, all of these are 100% legal when done right- you just document to properly defend, and you cannot be unreasonable. Sounds easy, right? If your tax professional says Nope, then perhaps you need to find the right real estate CPA to guide you.

Multi-Member LLC Cloak

Worried about audit exposure and risk with your short-term rental property and the big tax deduction from cost segregation paired up with bonus depreciation? A multi-member limited liability company can provide some distance and some invisibility. Form 8825 in conjunction with a partnership tax return (Form 1065) enjoys a much lower audit rate than an individual tax return (Form 1040). Your rental property loss is just a bit less in the IRS’s face.

See Benefits of Rental Property In Partnership Entities section for more information.

Wyoming LLC Holding Company Tip

Want even more anonymity along with wealth transfer? Have your rental property owned by an LLC, and have that LLC owned by a Wyoming LLC that is a real estate holding company. In turn, the holding company is owned by you and your spouse, files a partnership tax return (unless you reside in a community property state) and the Operating Agreement dictates transfer of member interests upon death to act like a mini trust. Yet, another long sentence.

See Multi-Entity Rental Property Tiered Structure section for more information.

Property Management Company Hack

Create an LLC to manage your own rentals using a customary and usual fee arrangement. From there, you flip passive income into earned income (change the color of money if you will) and you can then fund a solo 401k plan for you and your spouse, plus put kids on payroll. This can also create more legitimacy for your real estate professional status hours. Some states require special licensure or handling for property management companies.

Home Office Travel Trick

A real home office turns “commuting” into “deductible business travel.” Keep in mind that your rental properties are businesses if you continuously and regularly work them with a profit motive. Back to the home office- driving from your home to check on your rental across town is typically considered commuting and therefore not deductible. Yuck! Conversely, a home office makes your commute from the bedroom to the basement, and miles from there are business miles. You need a dedicated space that you use regularly and exclusively for the rental property activities. Travel outside your tax home usually is deductible without a home office.

See Rental Property Travel Deductions section for more information.

Buying A Car For Your Rental Property

Buying an automobile for your rental properties isn’t automatically deductible. It must be both ordinary (common in your business) and necessary (actually useful). However, once you clear those hurdles, it becomes a nice tax deduction. Passenger automobiles are listed property, so you’ll need mileage logs if you mix business with pleasure, or sufficient evidence if you claim the automobile is 100% for the rental business. Heavy vehicles (over 6,000 pounds) remain eligible for IRC Section 179 expensing plus 100% bonus depreciation. Therefore, a $100,000 truck is fully deducted in year 1 and if you can sidestep the passive activity loss limitations, then this is a direct tax deduction to you.

See Buying A Car For The Rental Property section for more information.

Put Kids On Payroll (for real)

Pay your kids for legitimate work such as cleaning, data entry, mowing the lawn or managing listings. To give your kid $10,000 you might have to earn $15,000 given your income taxes. Conversely, with payroll processing (yes, real W-2 and everything), you deduct $10,000 in wage expense at a high tax rate and your kid pays $0 in taxes, plus they can fund their Roth IRA and save for college. They can still be your dependent too. This either lowers your taxable rental property income or extends your rental losses that you deduct (provided you get around the passive activity loss rules with short-term rental loophole or real estate professional status).

See Paying Your Children From The Rental section for more information.

Your Business Rents Your STR Tip

Your business can rent your short-term rental for real meetings and retreats when you document it properly. Fair market rent, agendas, attendees, and photos are helpful when defending the “trust me, we talked about KPIs in the hot tub.” You can safely take net business profit, from an S Corp for example, and use it to offset rental property losses. This rental property hack is incredible if you are unable to deduct rental losses otherwise. As an aside, this is a slight twist on the August Rule.

See My Business Rents My Short-Term Rental section for more information.

Your Business Rents Your LTR

Similarly to your business renting your short-term rental from time to time, your business could also rent your long-term rental as a second office location. You have a lovely condo in San Diego, and you are drumming up business in Southern California, why not have your business rent the condo from you? Sure, there are rules and risk, but they are manageable from a smart real estate CPA.

Retro Cost Seg Time Machine

File Form 3115 with an IRC Section 481(a) adjustment and run a look-back cost segregation study to scoop up old depreciation and drop it into the current year. This is especially handy if you’ve hit the short-term rental loophole eligibility or real estate professional status this year, yet you won’t in future years. Also, this a great tax planning trick when you have an artificially or unusually high income from other sources such as W-2 or capital gains. This is like a nice food pairing such as grilled cheese and tomato soup in the dead of winter.

See Retroactive Look-Back Cost Segregation Study section for more information.

The Spouse Hours Trick

When you and your spouse work on the rental property together, those hours are combined when filing a joint tax return to meet material participation hours. Romantic dinner? Nope, but if you have a separate property management LLC, then Yes the business can pay for a business meeting over dinner and Yes your hours count if you spend time reviewing vendor contracts or local compliance rules. Keep in mind that spousal hours do not count towards the 750 hours needed for real estate professional status.

Short-Term Rental Now, Long-Term Rental Later

Run your property as a short-term rental for a year, grab 100% bonus depreciation, then pivot to a long-term rental or personal use. It’s like getting a tax deduction dessert ahead of the consistent rental property income and low headache green beans and vegetables. While that analogy might need some work, it remains a sound rental property hack. There is some risk that needs to be sorted with help of a rental property expert team.

Last Year Spending Splurge Rental Hack

Right before you wake up and decide that a short-term rental is no longer your idea of a good time, renovate the kitchen to claim a Qualified Improvement Property tax deduction and buy all new furniture in the style and taste that someone just like you would want. Consider the option of selling the money pit, but then come to your senses and say, “hey, this could be a nice second home.” Yup! You guessed it. Most risk that needs to be sorted.

See Arbitrage Of Converting STR To Second Home section for more information.

Group Related Activities Rental Tip

Grouping similar activities together helps with material participation thresholds. Short-term rentals together. Long-term rentals together. Group your business with the office condo that you own personally to offset business income with self-rental losses (if you don’t group, your self-rental losses are passive and therefore limited). This is done under Treasury Regulations Section 1.469-4 which is the general grouping election versus 1.469-9g which is the one reserved for real estate professionals.

Group Your Late Year STR Purchase

Bought a new short-term rental deep into the year? Worried about hitting 100 hours with no one else doing more than you? Can’t really swing the substantially all hours threshold without renting a hotel next to your short-term rental property? Group the shiny new STR with your other STR(s) so your hours stack up for material participation. Would this be a hacky stack? Oh, don’t roll your eyes.

Jet Ski With A Schedule E

Lease recreational gear (kayaks, golf cart, bikes) to guests as part of the rental property. You can purchase equipment, depreciate it, and use those losses to offset rental income and reduce your rental property income taxes. When you visit your STR, you have something fun to play with as well (just keep personal use in check). Group the activity (the equipment and the rental) together to help with material participation for both activities.

See Renting Recreational Equipment Alongside Your Rental Property for more information.

Maintenance Days Don’t Count Against You

Under IRC Section 280A, workdays don’t count as personal use provided that substantially most of the day was spent on repairs. Tack on some personal use days yet keep the primary purpose of the trip as repairs, and travel might be deductible as well. A nice little combo platter. Be cautious- spending 32 hours changing the toilet is unreasonable and tax courts are filled with humans who understand the game (and the player).

Slice And Dice Bonus Depreciation Tip

Property with 20 years of useful life or less is generally eligible for bonus depreciation. However, with smart tax planning by rental property CPA, you might want to opt out of 5-year property, and let 7-year and 15-year property be fully deducted. This allows for some nice depreciation in the future as well as a big chunk today. This hedges your bet between today and tomorrow.

Place In Service Day 1, Renovate Day 2

Placing your rental property into service where it is ready and available for rent (and you can support it), starts two critical clocks- a) material participation time and b) operating expenses such as insurance, utilities and HOA dues are deductible. It also opens the door to Qualified Improvement Property (QIP) where you may be able to fully deduct a $100,000 kitchen renovation in the first year should you have a short-term rental. If you buy on a Monday and renovate on a Tuesday, then you are stuck with normal depreciation. Yuck.

See Rental Property In Service Defined for more information.

Closing Thoughts

Rental properties remain a wealth-building tool first and foremost. Can we weave some tax efficiency into the mix? Yes. Can we add some personal pleasure to all this? Yes.