Published by AE Tax Advisors Team • 2026-02-22

Couple Acquires 3 STRs and Captures $380,000 in Year 1 Depreciation

The Client

Derek and Samantha Cole, a dual-income couple in Dallas, Texas, earned combined W-2 income of $440,000. Over a 12-month period, they acquired three short-term rental properties -- a $520,000 cabin in Broken Bow, Oklahoma, a $410,000 beachfront condo in Destin, Florida, and a $380,000 mountain home in Blue Ridge, Georgia.

The Problem

With $440,000 in W-2 income, the Coles faced annual federal taxes of approximately $105,000. They wanted to build a rental portfolio that would both generate income and significantly reduce their tax burden. Their prior advisor had not mentioned the STR tax strategy.

Our Strategy

We structured all three acquisitions for maximum tax benefit. Cost segregation studies were performed on each property, reclassifying a combined $468,000 into accelerated categories. With bonus depreciation on all three properties plus $62,000 in furnishing write-offs, total Year 1 depreciation reached $530,000. Samantha served as the primary operator, documenting material participation across all three properties under the grouping election.

The Results

After applying operating expenses and mortgage interest, total deductible losses of $380,000 offset the Coles' W-2 income. Their federal tax bill dropped from $105,000 to under $8,000 -- a savings of approximately $97,000 in Year 1. The three properties also generated combined gross revenue of $142,000. Remaining depreciation carries forward to offset income in Year 2.

Key Takeaway

Acquiring multiple STR properties in the same tax year multiplies the Year 1 tax benefit. With cost segregation on each property and proper material participation documentation, a portfolio approach can offset even the highest W-2 incomes.