An apartment by any other name is still an apartment, but it might provide more of a tax break if you call it a hotel.
Here's why: The new tax law limits the amount of the annual loss from an apartment building that investors can apply against ordinary income to cut their taxes. The maximum deduction is $25,000, and it can only be taken if the investor is actively involved in managing the property. What's more, the maximum deduction drops off as adjusted gross income rises above $100,000.
The good news is that the $100,000 income limit and the $25,000 maximum deduction don't apply for hotel investments. So the trick is to determine whether your apartment can be considered a hotel.
What qualifies? According to the Tax Reduction Institute in Washington, the building needs to be rented primarily by tenants who stay less than 30 days. The owner should provide cleaning services and perhaps tourist maps for guests. Also, neither the owner nor any relatives can live on the premises.
Robert A. Sittig, vice president of the institute, suggested that owners of guest houses who have been treating their businesses as rental property for tax purposes might benefit from the strategy.