courtneyk/Getty Images A Trump tax break is helping vacation-rental investors save thousands on their tax bill. The strategy only works if owners actively manage the rental and meet certain requirements. Tax professionals told Business Insider who should and shouldn't go after the tax break. President Trump's Big Beautiful Bill handed owners of vacation rentals a tax break that seems almost too good to be true. "Some people say it's like a free down payment on a house," Jeremy Werden, co-founder of a short-term rental analysis tool, BNBCalc. "When you submit your tax return, the government could wire you six figures just because you bought a house." The bill made permanent a tax break that allows short-term rental investors to deduct much of the cost of a home from their W-2 income, cutting their tax bill by tens of thousands of dollars. For those making between $200,000 to $1 million a year, "this may be one of the best ways to build wealth," said Werden, turning a tax cut into a real estate portfolio. The biggest savings Werden has seen came from one customer who bought roughly $30 million in homes in the last months of 2025 to offset "almost all" of their 8-figure tax bill. However, this isn't free money. Investors have to actively operate the property, comply with tax regulations, and make smart real estate investment decisions. The government can make you prove that you really put in the work to deserve the tax break. But if you do, you could end up with the government helping to buy your vacation rental. Tax professionals and investors told Business Insider about who should, and shouldn't, take the leap. Paid to buy a house Imagine you're a high-earning doctor who just bought your first vacation rental in Tennessee's Smoky Mountains for $500,000. The backbone of the strategy is depreciation, a tax concept that allows the owner of an asset to deduct part of its value each year as it is slowly eroded by time. It's then supercharged by bonus depreciation, the ability to claim all of a home's depreciable value in the first year as a loss, the idea being that the upfront tax benefit will incentivize investors to put money to work now. The first step is a cost-segregation study of the home, which breaks down its value into components such as the roof and boiler. A cost-segregation study typically identifies roughly a third of the home's value for depreciation, said Ryan Bakke, a CPA who works closely with the sector. If you bought a $450,000 home on a $50,000 plot of land, that could translate to roughly $150,000 in depreciation deductions. As you're in the highest tax bracket, that deduction would reduce your tax bill by $55,000. But don't start celebrating your government-subsidized down payment just yet. Most landlords can't use rental property tax breaks to reduce the taxes they owe on their income. Qualifying short-term rental owners can, but only if they treat the property like a real business rather than a passive investment. For it to be your business, you need to put the sweat equity in by satisfying the "material participation" rule. The rule requires you to spend 500 hours a year running the property or portfolio of properties, or spend more than 100 hours a year working on the property, more than any other person. The average guest stay must be 7 days or less. Importantly, depreciation is a tax deferral, not forgiveness. If you were to sell the property, you would have to pay back the taxes, so investors usually either plan to pass the property on to their heirs or to sell it and do a 1031 exchange, rolling the money into a different eligible real estate investment without being taxed. Beautiful Bill This isn't the first time Trump passed bonus depreciation rules: his 2017 tax bill included 100% bonus depreciation for a little over 5 years, before it began to be phased out. The difference now is that it's permanent, said Michael Chang, who runs the coaching business STR Like the Best. "Permanency is key here, because it makes sense to invest in building the knowledge and the systems to run the business," Chang said. For busy professionals, learning to operate a short-term rental doesn't make sense unless it's a "durable strategy" that people can plan around, he said. One Florida investor told Business Insider that the tax savings from buying his first short-term rental in 2024 were so significant that he sold another investment property to buy a larger home to rent out after the Big Beautiful Bill restored 100% bonus depreciation. Werden saw a "spike" in business after the bill passed last summer. Now, 30% to 40% of his customers come to BNBCalc because of the tax savings, a demand that wasn't there beforehand. Unlike the last time there was bonus depreciation for short-term rentals, there's now a robust post-pandemic online community built around hustle culture and Airbnb to promote the loophole and teach others how to use it. And even though interest had begun to "fade out a little bit" for short-term rentals after rising rates cooled the market earlier this decade, the bill caused a "huge" resurgence, Bakke said. Of course, a permanent tax regime can be changed. "The Big Beautiful Bill made bonus appreciation permanent until a new administration comes in and changes it," Bakke said. "Tax law is always subject to whoever is in charge at the time." What's the rub? In order to make this strategy work for you, you need enough capital to buy a home, qualify for a mortgage, and have a large enough tax bill for the strategy to matter, said Chang. It may be most attractive to married couples because both spouses' hours count toward the requirement, and a stay-at-home parent can operate a small business. "Your taxes become their salary," Chang said, noting that they could pass their properties on to their children, avoiding the recapturing of the depreciated value and leaving a family legacy. Chang and Bakke agreed that this is more of a real estate investment strategy, not a tax strategy. Investors should buy a specific property for "three main reasons other than tax," said Bakke: cash flow, value appreciation, and paying down the debt. The tax benefits are just "the cherry on top," he said. At one of Bakke's events, he spoke to a woman who saved $60,000 in taxes but bought in the wrong market and was losing $3,500 a month on the property, and had to sell it at a loss. Owning real estate comes with the usual downsides — busted boilers and roofs and maintenance costs — as well as the risk that you'll buy in one of the more and more common municipalities that ban short-term rentals. If you're too high of an earner, the play may not be worth the "return on hassle," Bakke said. He described two doctors earning about $500,000 who hoped a single $300,000 cabin would become their retirement plan. "Great, you guys only need 24 more of those in order to replace your income," Bakke said. Expect some hassle, because the material participation rule means you can't outsource anything without tracking how much time you and everyone else spend on the property. And you can't fake it, because this strategy will increase your audit risk, said Bakke. Bakke said that all eight of his clients who use the strategy and were audited prevailed because he helps them keep pristine records. He has declined business from those who had been audited and came to him for help, he said, because their records were not up to snuff. "I know right away whether or not somebody's going to win or not based on the documents they keep," Bakke said. Read the original article on Business Insider