A Phoenix physician buys a $500,000 Airbnb. The study costs $795. The Year-1 deduction is $150,000.
One real property type, one real bracket, three sale scenarios. The full walkthrough — including what would change if Sarah were a passive investor instead, what happens if she sells in five years, and what the lookback would look like if she'd held this property since 2022.
The property
Sarah is a 42-year-old anesthesiologist in Phoenix. She earns $420,000 in W-2 wages, which puts her squarely in the 32% federal bracket. In March 2026 she closed on a 3-bed, 2-bath cabin in Sedona for $500,000 — fully furnished, with a hot tub, a fire pit, and the kind of mountain-view photography that turns into 4.9-star Airbnb listings. She'll self-manage; her partner handles bookings. Average guest stay: four nights.
Three facts make this property a textbook case for the STR loophole. One: average stay under seven days. Two: Sarah and her partner together will clear 150+ hours of personal involvement in the first year (cleaning, guest comms, restocking, repairs). Three: nobody else materially participates. That combination lets her treat the rental loss as non-passive under §469 without needing Real Estate Professional Status.
It's a textbook case. The STR loophole is what makes the Year-1 deduction actually hit her W-2, instead of suspending into the void. — Cost Seg Smart Research Team
The inputs
The math, step by step
The answer
Two things worth flagging. First, this is the Year-1 number. Over ten years, the cumulative savings (Year-1 reclassified + nine years of residual straight-line on the remaining basis) lands at roughly $58,200 in her combined bracket. The Year-1 deduction is doing most of the work.
Second, this assumes she holds the property for at least five years and rents it out continuously as an STR. If either of those changes, the math changes — see the alternates below.
If Sarah were…
What this example skips
Four things are deliberately not modeled in the headline number above. Listing them here so you know exactly what isn't in the multiple.
NIIT. Sarah is comfortably above the $250K MFJ threshold, so the 3.8% Net Investment Income Tax would apply to passive rental income — except her STR-with-material-participation status makes it non-passive and exempt. Net effect on her case: zero. For the passive variant above, NIIT would reduce the future-unlock value of the deduction by about 4%.
Land allocation. The Sedona property's land-to-improvement split is roughly 18/82 per the Coconino County assessor — slightly under our 20% network default. The Advanced toggle would set basis at ~$410K instead of $500K and drop the Year-1 deduction to $123,000. The multiple still clears 50×.
Time value of money. The 10-year cumulative number is undiscounted. At a 6% discount rate, the present value of years 2–10 falls to about $5,800 in real terms — meaning ~93% of the value is concentrated in Year 1 anyway.
Audit risk. A study from a qualified engineering provider following the IRS Audit Technique Guide carries minimal audit risk; a study from a generic CPA or a back-of-envelope spreadsheet does not. The fee on this page is for the engineered version. The savings on this page assume the deduction holds up; in 200+ studies defended, our loss rate is zero.
Order the actual study. The estimate becomes a schedule.
Sarah's inputs carry through to the costsegsmart.com order form. Six weeks later her CPA gets a depreciation schedule, a §481(a) adjustment if needed, and the audit-ready engineering report. The math above turns into a 1040.
Order Sarah's study at costsegsmart.com