A short-term rental bought in September through December is tested for the year under the same rules as one bought in January: the property has to be placed in service in the tax year, the average guest stay across the year's bookings has to be seven days or less under Treas. Reg. §1.469-1T(e)(3), and you have to materially participate under one of the tests in Treas. Reg. §1.469-5T. None of those rules is prorated. What changes is that every one of them has to be true inside a window of a few weeks, with a handful of stays and a compressed hours count. This post lays out what has to be true, not whether it will be.
Three clocks that start on different days
Owners tend to think of "the purchase" as one event. For tax purposes there are three dates, and they rarely coincide.
- Closing. The day you own the property. It starts nothing by itself under IRC §469 or the depreciation rules.
- Placed in service. For depreciation, property is placed in service when it is ready and available for its intended use, which for a rental generally means furnished, listed and available to guests, not necessarily occupied. IRS Publication 527 and Publication 946 describe the standard. Depreciation, including any bonus depreciation, begins here.
- First guest. The day the seven-day average stay gets its first data point, and the day most practitioners are comfortable saying operational participation has clearly begun.
A closing on October 10, a listing that goes live November 20, and a first check-in on December 5 is a normal fall sequence. The property is placed in service in the tax year, but the operating year is 26 days long.
Do setup hours before the first guest count?
For a conventional rental activity, hours spent getting a property ready before it is available are often treated as acquisition or start-up time rather than participation in the rental activity. For an STR that will not be a "rental activity" at all under the seven-day rule, some practitioners take the position that work performed to open the business — furnishing, photographing, building the listing, setting up locks and supplies — is participation in that trade or business.
That is a position, not a settled rule, and this post does not take it for you. The record-keeping answer does not depend on which way your CPA goes: log every pre-opening hour with the same date, task and duration as any other entry, and tag it as pre-opening so a preparer can include or exclude the block with one filter. Investor-type work, such as evaluating the market or comparing loan offers, is excluded from participation under Treas. Reg. §1.469-5T(f)(2)(ii) regardless of timing, so keep it out of the count entirely.
100 hours in 12 weeks
The 100-hour test in Treas. Reg. §1.469-5T(a)(3) requires more than 100 hours and more than any other individual. Over 12 weeks that is roughly 8.5 hours a week of real operational work. Whether that is realistic depends on how much you do yourself.
A week-by-week shape that some fall owners recognize:
| Weeks | Typical work | Notes |
|---|---|---|
| 1–3 | Furnishing, deliveries, assembly, safety equipment, photography | Pre-opening; tag it |
| 3–5 | Listing copy, pricing setup, house manual, smart lock, supply inventory | Pre-opening; tag it |
| 5–12 | Guest messaging, turnovers or cleaner coordination, restocking, repairs, reviews | Operational |
Two cautions. First, every hour has to be actual time on a specific task; the Tax Court has rejected logs built from standard blocks, as in Mirch (T.C. Memo 2025-128). Second, the comparison prong is live from day one. If a designer, a handyman and a cleaner each put in significant hours in those same weeks, the "more than any other individual" question has to be answered with their hours documented next to yours. The 500-hour test removes the comparison but is out of reach in one quarter for almost everyone.
If the operational weeks alone do not get past 100, and the pre-opening hours are what carry the total, your CPA needs to know that, because the position rests on the pre-opening question above.
The seven-day average with a handful of stays
The average period of customer use is computed for the year, per property, as total days of customer use divided by the number of stays. With forty stays, one long booking moves the average a little. With five stays, it moves it a lot.
A fictional December: four stays of 3 nights and one stay of 14 nights is 26 nights over 5 stays, an average of 5.2. Replace the 14-night stay with a 30-night one and the average is 8.4. The activity is then a rental activity for the year, and the non-passive position is gone regardless of hours.
Off-season bookings tend to be long, and holiday bookings tend to be short, so a fall opening can go either way. Know the running average before accepting each booking, and count direct and off-platform stays too.
Cost segregation and bonus depreciation timing
Bonus depreciation attaches to the placed-in-service date, not the closing date, and current law allows 100 percent bonus depreciation for qualifying property acquired after January 19, 2025; verify the details for your facts against current IRS guidance. A cost segregation study reclassifies part of the building's cost into shorter-lived components that qualify.
The study itself can be ordered after year-end and applied to the year the property was placed in service, so the December timing pressure is on placement in service and on hours, not on the study. What the study cannot do is decide whether the loss it creates is usable. That is entirely a §469 question. The cost segregation guide covers the interaction; the short version is that the deduction is easy to generate and hard to use without the hours and the average stay behind it.
When waiting until January is the better answer
There are fall closings where the honest conclusion is that the property will not be ready, or the hours will not be real, or the first few bookings will be long. In those cases the alternatives are worth putting in front of a CPA before December:
- Place in service in January. Depreciation and the STR analysis both start in the following tax year, with a full year of stays and hours.
- Place in service now, accept passive treatment for this year. The loss is suspended, not lost, and carries forward. The next year's log starts on January 1.
- Do not order the cost segregation study until the position is clear. The study can be done later; the hours cannot.
None of these is a recommendation. They are the options a preparer will want to model, and the modeling is cheaper in November than in March.
Checklist for a Q4 closing
- Record the closing date, the date the listing went live, and the first check-in date. Keep the listing screenshot with its date.
- Start the hours log on the closing day. Tag pre-opening entries. Log actual minutes, not estimates.
- Add every other participant (cleaner, handyman, co-host) and log their hours from their invoices or task lists.
- Track stays and nights per property as bookings come in; recompute the average after each one.
- Keep personal-use days at zero, or record them exactly, since IRC §280A limits apply separately.
- Keep receipts and photos attached to the larger entries: furniture assembly, repairs, supply runs.
- Book the CPA conversation for early December, with the log and booking list in hand, and use the year-end hours checklist to prepare.
STR Tracker shows 100-hour progress per property, so a fall owner can see week by week whether the operational hours are actually accumulating or whether the total is leaning on pre-opening work. That distinction is the one your preparer will ask about, and a fall purchase leaves no time to discover it late. If you are closing this quarter, start a free trial on the closing day and let the log run from there.