How does BNBCalc estimate tax savings on a short-term rental?

Where does BNBCalc estimate tax savings?

In a property analysis, the STR Tax Calculator (USA) section appears on Buy and Own analyses of US homes. It opens with "If you buy this property, your estimated tax deduction will be..." and lists Deductible mortgage interest, Deductible property tax, Estimated depreciation value, Estimated gross deduction, Your income tax rate and Estimated tax savings. The Long Term Rental view of a Buy analysis has its own LTR Tax Calculator (USA), which uses standard depreciation only.

You don't need an analysis for a rough number, though. BNBCalc's free Airbnb tax calculator compares the year-one loss and tax offset of a short-term rental with a long-term one from a handful of inputs.

How does BNBCalc calculate the deduction?

The STR Tax Calculator adds three things for year one, then applies your tax rate:

Your income tax rate and the structure share are inputs you can change in the section, so make sure they match what your CPA expects for your situation before you use the total.

How big could the deduction be? A worked example

Take a $400,000 home bought with 20% down at 6% over 30 years, $8,500 of furniture and renovations, the default 70% structure share and property tax of $3,960 a year:

Almost all of the year-one figure comes from bonus depreciation, which is why the estimate leans so heavily on the structure share and the accelerated percentage, and why it shrinks after year one.

How do rental income and later years change it?

The Estimated tax savings line values the whole gross deduction at your tax rate, before the rental's own income. To see that side, click How does rental income affect this tax estimate? Based on Months in service in year 1 (9 to start), it estimates the home's year-one rental profit or loss, nets it against the gross deduction and shows the result as Estimated year-one taxable rental income (loss), while property tax and mortgage interest stay on a full-year basis. Below that, a Multi-Year Tax Schedule shows years 1 to 5, 10, 15 and 30, so you can see how much of the benefit falls in the first year.

On a short-term rental, the section also asks Plan to claim the STR loophole? and offers Track my hours, which opens BNBCalc's Hours tracker with the property already added.

The "STR loophole" is investors' shorthand for two IRS rules working together. IRS Publication 925 says an activity isn't a rental activity if the average guest stay is 7 days or less, and a business activity you materially participate in isn't a passive activity, so its losses aren't held back by the passive activity rules. Whether both apply to you, and in which year, is a question for your CPA, and BNBCalc's estimate shows what the deduction would be worth if they do.

What doesn't the estimate cover?

The STR Tax Calculator doesn't check whether you qualify for any of these deductions or for the treatment it assumes. It also leaves out state income tax, depreciation recapture when you sell and any limits on using rental losses against your other income. Read it as a way to compare properties and start the conversation with your CPA, not as the number you'll file.