The rules are different for short-term.
Short-Term Rental Tax for Valley Owners
If you rent a property in Aspen, Snowmass, Basalt, Carbondale, or Glenwood Springs on short stays, you're sitting in one of the few places in the tax code where an active loss is actually available to a property owner. Whether you get it depends on facts you control, and on records you have to keep as you go.
Valley owners
Who we help
Single owners
One property, often a second home that earns its keep part of the year. The personal-use line is where this gets interesting.
Partnership rentals
Property held with partners or family, where participation has to be evaluated per owner and the K-1s have to tell a consistent story.
Single or multi-dwelling
One unit or several, including mixed properties where part is rented short-term and part isn't.
Average stay and participation
How the short-term rental loophole works
The short-term rental loophole is the rule that a rental with a short enough average stay isn't automatically treated as a passive rental activity. If the average guest stay is short and the owner materially participates in running it, losses from the property can offset non-passive income rather than being trapped as passive losses.
The average-stay test
The classification turns on average stay across the year, not on how you describe the property or which platform you list it on. Longer bookings in shoulder season pull the average in a direction owners rarely notice until the return is prepared.
Material participation
Meeting the stay test is only half of it. You also have to be involved in running the property yourself. Owners who hand everything to a full-service property manager frequently fail this half, and it's the most common place we see the strategy fall apart.
Where owners get it wrong
Three things, repeatedly. They don't track hours as they go and can't substantiate participation afterward. They assume the property manager's involvement counts as theirs. And they plan the strategy in the spring, when the year that would have qualified is already over.
Out of the passive bucket
Depreciation on a short-term rental
Depreciation is usually the largest deduction a rental produces. On a short-term rental that qualifies under the rules above, it matters even more, because the loss it helps create isn't stuck in the passive bucket.
The number depends on getting the basis right from the start: how the purchase price splits between land and building, closing costs, furnishings, and improvements made after you bought it. Furnishings and many improvements depreciate faster than the building itself, which is why a careful basis schedule in the first year pays off for as long as you own the property.
Beyond income tax
Colorado lodging and local occupancy tax
Income tax isn't the only tax your short-term rental generates. Short stays trigger state and local lodging or occupancy taxes, and in the valley the rules vary by jurisdiction. Aspen, Snowmass Village, Basalt, Carbondale, Glenwood Springs and unincorporated Pitkin, Eagle and Garfield county each have their own licensing and remittance requirements.
Booking platforms collect and remit some of these in some places, which is where owners get caught. Platform collection doesn't always cover every applicable tax, and it doesn't remove a licensing or filing obligation that sits with you.
We don't prepare or file lodging or other local tax returns. We cover the obligation here so it doesn't catch you out, but the filing itself stays with you or whoever handles it for you.
How pricing works
We bill hourly for tax compliance work instead of selling fixed packages or tiers. What a return costs depends on how complex it is, and you get an estimate before we start.
Rentals, stays and lodging tax
Common questions
What actually is the short-term rental loophole?
It's the rule that a rental with a short enough average guest stay isn't automatically a passive rental activity. Combine that with material participation and losses from the property can offset non-passive income instead of being trapped.
Does using a property manager disqualify me?
Not automatically, but it makes the participation test much harder to meet, because the hours that count are yours and not your manager's. This is the most common reason the strategy fails in practice.
Do I need to track my hours?
Yes, and contemporaneously. Reconstructing a year of hours after the fact is the weakest possible position to be in if the participation is ever questioned. A simple log kept as you go is enough.
Is depreciation different on a short-term rental?
The basics are the same as any rental, but a short-term rental can be depreciated on a different schedule than a long-term residential rental, and the deduction is more valuable when the participation rules are met. Set the basis up carefully in the first year.
Airbnb collects lodging tax for me. Am I covered?
Sometimes partly, and not always completely. Platform collection varies by jurisdiction and by which tax is at issue, and it doesn't necessarily satisfy a licensing or filing obligation that belongs to you. Check against your specific town rather than assuming.
I use the place myself part of the year. Does that change things?
It can change a great deal, including how expenses are allocated and whether the property is treated as a residence at all. Personal use is one of the first things we ask about.
The short-term rental strategy is decided during the year, not at filing.
If you own or are buying a short-term rental in the valley, the earlier the conversation, the more of it is still available to you. Send us a message, or call (970) 315-2991.