For CPAs & Tax Advisors
Have a Client Looking for Additional Tax Deductions?
We help high-income taxpayers evaluate short-term rental investments that may generate substantial depreciation benefits while producing cash flow: from acquisition through professional management. You stay their tax advisor; we do the work.
Informational only — not tax, legal, or accounting advice. Clients should consult their own tax advisor.
The Problem
Your Clients Often Have the Same Problem
A properly structured short-term rental investment may create meaningful depreciation opportunities while building long-term wealth. Whether it fits a particular client is a question for you, their advisor. We make the real estate side work.
Why Refer to Us
Why CPAs Trust Us With Their Clients
Licensed Local Broker
Jacob Serrill is a licensed Oregon broker with Kelly Right Real Estate, active across Portland residential listings and investment property, and a short-term rental owner himself.
300+ Doors Under Management
The team we work with owns and operates 300+ short-term rental doors across Portland and the Mt. Hood corridor — real operating data, not theory.
A Full Operating Ecosystem
Brokerage, plus a contracting business, a furniture store, and a home-staging company, so a property can go from purchase to guest-ready under one roof.
End-to-End Support
We handle the education, the property search, first-year setup support, and ongoing management: a guided path for your client, and no new work for you.
Local Market Expertise
Deep knowledge of which Portland and Mt. Hood submarkets actually perform as short-term rentals, and which don't.
You Stay the Advisor
We never give tax advice — you stay your client's trusted professional. And you become the one who brought them a real solution, not just this year's bill. We handle the real estate side and keep you informed throughout.
The Strategy
The Short-Term Rental Tax Position, in Full
The whole argument: the statute, the case law, the numbers, and the limiters. No form, no download; this is the same material we hand you in print. You’re the advisor, and we never give tax advice.
Why a Short-Term Rental Escapes the Passive Wall
Under IRC §469, rental real estate is per se passive — depreciation generally offsets only passive income, never wages or active business income. That’s the wall, and it’s why “just buy a rental” rarely helps a high earner who can’t clear the 750-hour Real Estate Professional bar.
The short-term-rental carve-out sidesteps it. Treas. Reg. §1.469-1T(e)(3)(ii)(A) says an activity is not a “rental activity” when the average guest stay is seven days or less. Once it isn’t a rental activity, the per-se-passive rule doesn’t apply. Ordinary material-participation rules decide whether the loss is active. No Real Estate Professional status required. That is the one large depreciation play still open to a maxed-out, high-W-2 client.
How the average is computed (Reg. §1.469-1T(e)(3)(iii)(D)): total rented days ÷ number of separate guest stays. 200 rented days across 30 bookings = a 6.7-day average and qualifies. Monthly / 30-day bookings quietly push the average over seven and blow the exception.
“Won’t My Client Get Audited and Have to Repay It?”
Straight answer: yes, taxpayers do lose this on audit — but almost never because of the law. The IRS rarely contests the seven-day rule. It attacks the second half of the test, material participation. In every losing case, the deduction failed not because the strategy was invalid, but because the taxpayer couldn’t prove they did the work.
Mirch v. Commissioner
T.C. Memo. 2025-128
The headline case. Attorneys ran a ≤7-day rental and claimed ~920 hours. The court agreed it qualified, then disallowed the loss because the log was a “ballpark guesstimate”: flat 8-hr “on-call” days and 7-hr turnovers while also deducting a cleaning fee. Qualifying isn’t the test; proving the hours is.
Lucero v. Commissioner
T.C. Memo. 2020-136
The property-manager trap. A manager ran day-to-day; the owner only set rates and approved expenses over $100. Logs were reconstructed at audit, and (decisively) he had no evidence of the manager’s hours, so couldn’t prove his own exceeded everyone else’s. Denied.
Pohoski v. Commissioner
T.C. Memo. 1998-17
The foundational version: the taxpayer couldn’t document the management company’s hours, so the “substantially all / more-than-anyone” tests were unprovable.
Moss v. Commissioner
135 T.C. 365 (2010)
The substantiation standard: a calendar reconstructed later from “cryptic notes,” recording tasks but not hours, was rejected. Ballpark estimates and standardized time blocks don’t survive.
The pattern, in one line: they didn’t lose because the strategy is aggressive. They lost on how the property was managed and documented. Both operational choices made before and during the year. That is exactly where an operator who understands the test changes the outcome.
Material Participation: the Whole Game
It’s met by satisfying one of the seven tests in Reg. §1.469-5T. For a busy short-term-rental owner, three are realistic:
The spouse lever: a spouse’s participation counts as the taxpayer’s (§469(h)(5)). For a time-poor physician or attorney, the spouse is often the real lead operator — running the setup and first season. Build the plan around “owner or spouse” from the start.
The Operator’s Paradox — and How We Resolve It
Here’s the tension no one on the brochure side names: the more completely a manager runs the property, the more it dismantles the client’s tax benefit. Hand the keys to one full-service manager and the 100-hour and “substantially all” tests are gone: the Lucero / Pohoski fact pattern. We build the engagement backward from that:
- The owner leads in the cost-seg year. Material participation is tested annually (§469(h)(1)); the big deduction lands in year one, so that year the owner stays the lead operator (pricing, listing, guest decisions, vendor coordination), and our role is deliberately supporting, with our hours documented. Management converts to a fuller role later.
- We use specialized vendors and document each one’s hours. Several cleaners / handymen at a few hours each (each recorded) gives a clear, person-by-person record, not one all-in manager whose hours are invisible.
- We report our hours (ours and our vendors’) per property, per month. The exact evidence Pohoski and Lucero lacked.
- The owner stays inside the contract. Owner retains pricing authority and vendor approval; no master lease (that would convert the average stay to a 12-month term and kill the seven-day rule).
The reframe: we’re not a reason the position is riskier — we’re a substantiation engine. We don’t make the tax position more aggressive; we make it more defensible, by producing the contemporaneous, corroborated records the Tax Court demands and the audited doctor never had.
The Substantiation Kit
What your client actually gets
Every owner receives a Year-One Material Participation Worksheet and a companion Excel time log: pre-loaded with the qualifying activity categories, the exclusions (investor and pure-construction time), the 100- and 500-hour trackers, and a record of every other person’s hours. It’s filled in contemporaneously, as the work happens. The credible, real-time record the losing taxpayers never kept.
Provided to every client and set up with you: a working tool, not a download.
Participation log — sample
| Activity | Who | Hrs |
|---|---|---|
| Listing photos & copy | Owner | 4.0 |
| Pricing & channel setup | Spouse | 2.5 |
| First turnover clean | Owner | 3.0 |
| Cleaner (vendor) | Vendor | 1.5 |
Toward 100-hr
vs. anyone else
Owner leads ✓
Companion Excel log totals hours & tracks each test automatically.
The Deduction: Cost Segregation + 100% Bonus
Two tools concentrate depreciation into the early years. Cost segregation is an engineering study that reclassifies parts of the building (furniture, appliances, fixtures, finishes, land improvements) out of the 27.5 / 39-year schedule into 5-, 7-, and 15-year lives. 100% bonus depreciation then deducts those shorter-lived assets in full in year one.
2025 update: the One Big Beautiful Bill Act (signed July 4, 2025) permanently restored 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025. The 5/7/15-year cost-seg buckets are bonus-eligible; the building shell is not.
An illustrative example: Mt. Hood cabin
| Purchase price (acquired / placed in service after 1/19/25) | $800,000 |
| Less land (non-depreciable, ~20%) | ($160,000) |
| Depreciable basis | $640,000 |
| Reclassified to 5/7/15-yr property (~28%) → 100% bonus | ~$179,000 |
| Partial-year depreciation on remaining shell | ~$8,000–$12,000 |
| Approx. year-one depreciation deduction | ~$185,000–$190,000 |
| Illustrative year-one federal tax saved @ 37%, if the loss is non-passive | ~$68,000 |
Illustrative only; real allocations depend on the cost-seg study, land values, acquisition timing, and the client’s facts. Component split scaled from published cost-seg studies (~25–30% reclassification). Before state effects and operating income / expense.
Don’t forget the back end: this is timing and present value, not free money. Accelerated depreciation reduces basis and sets up recapture at sale — §1245 buckets recapture as ordinary income, §1250 at up to 25%. The value is real but best realized over a meaningful hold, and should be modeled against the client’s exit horizon.
What a Careful Advisor Will Also Check
The seven-day rule and material participation are the headline tests, but a defensible position clears several more. We flag these so the strategy you sign off on is one you’ve fully pressure-tested, not because we’re opining on them.
Self-employment tax
The §469 (passive) and §1402 (SE-tax) tests are independent. Substantial hotel-like services (daily housekeeping, meals, concierge) push income onto Schedule C and into 15.3% SE tax (CCA 202151005). Satisfy participation through management work, not in-stay hospitality.
§280A personal use
More than the greater of 14 days or 10% of rented days makes it a residence and caps deductions at rental income. Keep personal use out of the big-deduction year.
Placed in service
Depreciation starts only when the property is listed and available; a late-year close with too few bookings can also leave you unable to establish the ≤7-day average.
§461(l) excess business loss
Made permanent by OBBBA; for 2026, $256K single / $512K MFJ. A very large single-year loss can exceed the cap — the excess isn’t lost, it carries forward as an NOL.
At-risk rules (§465)
The loss is capped at amounts at risk; a normal bank mortgage (qualified nonrecourse financing) generally counts, but seller-financed / nonrecourse structures may not.
Oregon non-conformity
Oregon does not conform to federal bonus depreciation. The big year-one benefit is primarily federal; the Oregon benefit is smaller and slower, and §179 may do more at the state level.
The Honest Part
Does It Actually Pencil?
Two questions separate a real recommendation from a sales pitch, and a good advisor asks both. We’d rather answer them here than have you wonder.
Is it a good investment even without the tax break?
The tax benefit should be the accelerant, not the reason. We only bring a client a property we’d underwrite without the deduction, because if the deal only works because of the write-off, it isn’t a deal.
That means being straight about risk. Short-term rentals produce income, but they carry real exposure: occupancy and nightly-rate swings, leverage, local regulation, and a travel market that softens. We underwrite conservatively (against our own booking data across 300+ managed doors, not pro-forma optimism) and we show the downside case, not just the upside. On a typical deal the conservative case runs near break-even and the expected case cash-flows; a client should be comfortable owning the asset if the tax benefit were zero. If they wouldn’t, we say so.
Is the benefit real after recapture?
Be clear-eyed: this is timing, not permanent savings. The honest measure isn’t the gross first-year number — it’s the present value of deferring tax at a high marginal rate today, plus any rate and character arbitrage, minus recapture at exit (§1245 as ordinary income, §1250 at up to 25%).
Two things make that net genuinely positive for the right client. First, time: dollars the IRS would otherwise take this year get redeployed and compound for the length of the hold: over seven to ten years that’s substantial, even after recapture. Second, the exit: a 1031 exchange defers the recapture entirely, rolling the basis forward into the next property. Over a short hold at the same tax rate with an outright sale, the benefit narrows toward the time-value alone. So the number that matters is modeled against the client’s actual hold horizon and exit plan — a conversation for you and the client, not a headline on a page.
When we tell a client no: if a client won’t lead the hands-on year, has no real interest in owning the asset, or is selling in a year or two with no 1031 plan, we tell them it isn’t a fit. A deduction that turns into an audit loss or a bad investment helps no one — least of all your relationship with the client.
Illustrative and general; net benefit depends entirely on the client’s facts, rates, hold period, and exit. Not tax advice. Model it for your client.
Clean Lines of Responsibility
The engagement is structured so liability sits where it belongs — and that division is itself an audit-defense feature.
We do
Acquisition guidance & submarket fit; furnishing & guest-ready setup; co-host / management within owner parameters; per-property, per-month hour records (ours & vendors’); booking & ≤7-day average data.
You do
All tax advice & the return position; the material-participation determination; cost-seg & depreciation decisions; the sign-off: you stay the trusted advisor.
The client does
Materially participates in the key year; keeps a contemporaneous time log; owns & certifies their own hours; makes the final investment decision.
No referral fees, by design. We never give tax advice; you remain your client’s advisor throughout. And we charge no referral fees: nothing to disclose, no conflict to manage, no question that your recommendation is on the merits. Your incentive is the simplest kind: a well-served client and a deeper advisory relationship.
Don't Take Our Word For It
An Operating Network, Not a Sales Pitch
Every part of this is a real, reviewable business your client can stand on: management, booking, design, and furnishings. Click through and see for yourself.
300+
doors under management
$7.5M
booked in 2025
+11.2%
same-home revenue, YoY
5.0★
Google rating
Management
Simply VRM
Full-service short-term rental management.
300+ doors managed · since 2014 · 60,000+ guest reviews
Direct Booking
Stay Portland
Our direct-booking brand for Portland homes.
80,000+ guests · 4.8★ (12,400+ reviews) · City-permitted
Cabins & Mountain Homes
Mt. Hood Basecamp
Cabins & mountain homes across the Mt. Hood corridor.
Government Camp · Welches · Rhododendron · Sandy
Staging & Design
Greylyn Wayne
Home staging & interior design.
2,500+ homes staged · 4× Street of Dreams · 4.9★
Furnishings
What's New Furniture
Furniture & furnishings showroom.
25,000 sq ft showroom · 4.8★ (400+ reviews)
How It Works
From Introduction to Managed Investment
You make one introduction. We handle the rest and keep you informed.
Strategy Call
We discuss the client's goals and timeline and, with their permission, coordinate with you as their tax advisor.
Property Acquisition
We identify and help acquire properties suited to short-term rental performance in proven Portland and Mt. Hood submarkets.
Setup & Furnishing
The client leads the first-year setup with our support, while our furniture and staging companies do the heavy lifting to get it guest-ready.
Professional Management
The property joins a management operation running 300+ short-term rental doors across Portland and Mt. Hood.
Ongoing Reporting
Owners receive the operating and income information they need to work with you at tax time.
How the First Year Works
Hands-On Year One, Hands-Off After
The first-year deduction depends on the owner materially participating, so we structure year one around that, then take over. You confirm what the rules require; we make it practical and documented.
1 · Setup & Participation
The client (or their spouse) acquires the property, leads the setup, launches the listing, and runs the first season, building a documented record of material participation. We hand them a simple playbook and time log to make it straightforward.
2 · Placed in Service
We time the acquisition so the home is listed and booking before year-end, so the cost-segregation and bonus depreciation land in the same year the client participates.
3 · Fully Managed After
Once year one is established, the client hands day-to-day management to our team and steps back. The first-year deduction was a year-one event; from there it's genuinely hands-off.
Educational only. Not tax advice, and not a promise of any result. Whether a client materially participates or a property is placed in service depends on their facts and current law; you, their advisor, make that call.
For Your Practice
A Trusted Resource for Your Clients
When you make an introduction, here's what we take off your plate:
Have a client in mind? We built a page written for them (plain English, no pitch aimed at you) with real, on-market deals underwritten against our own booking data and downloadable proformas.
See the investor overview & live deals you can forwardCommon Questions
FAQ
Is this tax advice?+
No. Nothing on this page or in our materials is tax, legal, or accounting advice, and we don't provide it. We're real estate and short-term-rental professionals. Your client should rely on you (their CPA or tax advisor) for the tax treatment of any investment.
Why short-term rentals specifically?+
Short-term rentals are often discussed by tax professionals in the context of cost segregation and bonus depreciation, and the material-participation rules can differ from those for long-term rentals. Whether any of that applies to a given client depends entirely on their facts. That's your call as their advisor. Our role is to make the underlying real estate work: the right property, set up well, professionally managed.
What's the typical client profile?+
High-income earners (large W-2 income, business profits, or a one-time liquidity event) who are looking for additional planning options and are comfortable taking an active role in the first year before the property becomes a professionally managed investment.
What does it cost the CPA?+
Nothing. There's no cost and no added workload. You make an introduction; we handle education, acquisition, setup, and management, and keep you in the loop.
Do you work outside Portland and Mt. Hood?+
Our management network and market expertise are concentrated in the Portland metro and the Mt. Hood corridor. That focus is part of why the properties perform. Reach out and we'll tell you candidly whether a given market is a fit.
How do you handle my client relationship?+
Carefully. You remain the client's tax advisor and the relationship owner. We coordinate with you, keep you informed, and never step into the advisory role.
Who You Partner With
Your Point of Contact
Jacob Serrill
Broker · Kelly Right Real Estate
Jacob owns and operates short-term and long-term rentals of his own and works with a team that runs 300+ doors across Portland and Mt. Hood, plus contracting, furniture, and staging businesses that take a property from purchase to guest-ready.
Let's Talk
Want to Learn More?
Tell us a bit about your practice and we'll set up a quick, no-pressure call to walk you through how it works: no obligation, no cost, and nothing for you to prepare.
We typically reply within one business day. Your details stay private — no spam, ever.
This page is provided for general informational purposes only and is not tax, legal, accounting, or investment advice. Sell Portland Group and Kelly Right Real Estate do not provide tax advice. Any depreciation, deduction, or tax treatment depends on a client's individual circumstances and applicable law; clients must consult their own CPA, tax advisor, or attorney before making any investment or tax decision.
No representation or guarantee is made regarding rental income, occupancy, returns, depreciation, or any tax outcome. All real estate investments carry risk, including loss of principal. Individual results vary. Scenarios described are illustrative and do not reflect any specific client.
Real estate brokerage services provided by Jacob Serrill, Broker · Kelly Right Real Estate · 1011 SE Oak St, Portland OR 97214 · (503) 780-7521. Short-term rental management is provided by an affiliated management group. Equal Housing Opportunity.