Picture a place near the Sonoma Coast or the rolling coastal hills where you can spend a week in the summer or bring everyone together for Christmas. When you’re back home, you could rent it to guests on websites like Airbnb or VRBO. And if you earn a high W-2 income, there’s a tax strategy you may want to explore.
I’m a real estate agent, not a tax professional, and I’m not giving tax advice. I’m sharing this because it’s an option you might not know to ask your tax professional about.
Why short stays can make a difference
For most high W-2 earners, a loss from a typical long-term rental generally can’t offset income from a job. A short-term rental can work differently. If guests stay an average of seven days or less and you’re involved enough in running the rental to meet IRS rules, a qualifying loss may reduce your federal taxable income.
Depreciation can help create that loss on paper, even in a year when the rental brings in more than it costs to operate.
That means that your Airbnb rental could potentially make a profit AND reduce the amount of W-2 income that you need to pay taxes on!
Can you still use it as a getaway?
You can save Christmas week or part of the summer for yourself. How often you actually use the home matters, though. Too many personal days relative to the days you rent it can limit your ability to use a rental loss. I’d start with the dates you’d want for yourself and share that calendar with your tax professional.
Where to look in Sonoma County
There are still places in Sonoma County where you can buy a home eligible for whole-home short-term rental use. Whether you’re drawn to the coast or wine country, start with the specific address. Rules vary by location, and even if the seller already rents the home to guests, you’ll want to verify if it will still be eligible to rent out as a new owner.
If you’ve been dreaming about a Sonoma County getaway, let’s talk about where you’d love to spend time and how often you’d want to be there. I can help you find properties where short-term rental use may be possible, so you can bring a real address and a realistic plan to your tax professional.
Reach out to me and I can share more information about the approval process for an Airbnb/VRBO in Sonoma County, what kinds of properties are popular as vacation rentals, and negotiation strategies for getting the best possible price.