MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

The Tax Loophole for W2 High-Earners

28 Apr 2026 · 1 min

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In this segment, Mark Kohler explains a tax strategy that allows high‑earning W‑2 professionals (e.g., dentists, lawyers, restaurant owners) to deduct rental losses against their ordinary income without needing to qualify as a real‑estate professional. The key is to meet two criteria: (1) the property must be a qualified short‑term rental (a rental of 30 days or fewer per year) and (2) the taxpayer must materially participate in the rental activity. When both boxes are checked, the taxpayer can claim 100% bonus depreciation on the property, creating sizable losses that offset other income. Kohler contrasts this with long‑term rentals, which generally require real‑estate‑professional status to achieve the same tax benefit, highlighting why the short‑term rental loophole is especially valuable for high‑income W‑2 earners who rent on the side.

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This 100% bonus depreciation can be unlocked with a short-term rental when you materially participate. That's the big loophole. So investors want to get those two boxes checked and then get that loophole and take those losses against their other income. Now with a long-term rental, you can't do that unless you qualify as a real estate professional. That's not a requirement here. You could be a dentist, a lawyer, be a restaurant owner, and do a little short-term rental on the side. That's fine. You can still unlock those losses, but we've got to meet those two tests of qualified short-term rental and your material participation.