🏔️ How to Use Your Park City STR Investment and a Cost Segregation Study to Create Major Tax Advantages

Snippet Summary:
Investing in a Park City short-term rental — especially in high-performing areas like Upper Deer Valley, Lower Deer Valley, Old Town, PCMR Base, and Canyons Village — can yield exceptional returns. When paired with a cost segregation study, it unlocks powerful tax deductions that maximize cash flow and long-term ROI.

Why Park City Stands Out for STR Investors

Park City remains one of the most profitable short-term rental (STR) markets in the U.S., thanks to its year-round tourism, world-class skiing, and growing luxury segment. With limited supply and strong visitor demand, investors have excellent opportunities to capture both rental income and tax advantages.

2024–2025 STR Market Snapshot

• Average annual STR revenue: ~$85,000–$86,000

• Average daily rate (ADR): ~$447

• Average occupancy: ~50–55% annually

• Typical booked nights: ~200 per year

(Source: Airbtics, Key Data Dashboard, MarketMinder)

While these are citywide figures, performance varies widely by neighborhood — which is key when deciding where to invest.

Best Park City Areas for STR Investments

🏠 Upper Deer Valley

Home to Park City’s most luxurious ski-in/ski-out estates, Upper Deer Valley caters to high-net-worth guests seeking privacy and proximity to the slopes. Properties here command premium nightly rates and see strong winter occupancy.

Why it’s ideal for investors:

• Highest average ADRs in Park City

• Excellent appreciation potential

• Strong appeal to repeat guests and corporate stays

🏡 Lower Deer Valley

Just below the main resort base, Lower Deer Valley offers easy access to lifts and downtown amenities. Many homes here blend luxury with accessibility, attracting both ski families and summer visitors.

Investor takeaway:

• Consistent occupancy in both winter and summer

• Luxury single-family homes and townhomes with large depreciation bases

• Great candidate properties for cost segregation

🏘️ Old Town

Old Town’s historic charm and walkability to Main Street make it a year-round destination for festivals, Sundance events, and weekend getaways. STRs here can outperform average citywide occupancy thanks to their central location.

Investor takeaway:

• Strong short-stay demand (helps qualify for STR tax benefits)

• Wide mix of condos, townhomes, and smaller homes

• Excellent for maximizing bookings across all seasons

🎿 Park City Mountain Resort (PCMR) Base

Properties near PCMR attract families and sports travelers who prioritize easy ski access. While inventory is competitive, homes and condos here maintain strong winter rates.

Investor takeaway:

• Reliable ski-season demand

• Ideal for self-managed STR setups

• Strong potential for bonus depreciation due to newer builds

🏔️ Canyons Village

The Canyons area continues to see luxury growth, new developments, and strong tourism infrastructure. With its resort-style amenities, newer construction, and high ADR potential, it’s become a favorite among STR investors.

Investor takeaway:

• Consistently strong winter bookings

• Upscale amenities enhance rental appeal

• Excellent long-term appreciation outlook

How a Cost Segregation Study Multiplies Your ROI

A cost segregation study breaks your property into distinct asset classes — such as land improvements, building components, and personal property — allowing you to depreciate certain items over 5, 7, or 15 years instead of 27.5 years.

By front-loading depreciation, investors can deduct a significant portion of their purchase cost in the first few years — dramatically reducing taxable income and increasing cash flow.

Example:

A $2 million Park City home might identify 25–30% of its value in short-life assets. Depending on your tax bracket, that could translate to $150,000–$250,000+ in first-year deductions.

Bonus depreciation (still available at reduced rates) can further accelerate these deductions.

(Source: IRS Publication 527; The Real Estate CPA; Windes LLP)

Condos & Townhomes vs. Single-Family Homes — What Investors Should Know

Condos & Townhomes

• Typically lower purchase prices and smaller cost bases.

• Limited land improvements reduce 15-year depreciation opportunities.

• Shared building elements (like roofs or parking structures) may be partially excluded.

Tax takeaway:
Condos can benefit from cost segregation, but total deductions are generally smaller. Best for investors seeking entry-level STRs or consistent occupancy with manageable overhead.

Single-Family Homes

• Larger structures, land improvements, and private amenities (decks, driveways, landscaping).

• Higher proportion of 5-, 7-, and 15-year assets.

• Strongest candidates for cost segregation studies due to scale and complexity.

Tax takeaway:
Single-family STRs — especially luxury homes in Upper or Lower Deer Valley — offer the greatest potential tax savings from cost segregation and bonus depreciation.

STR Classification: Turning Paper Losses Into Real Savings

Under IRS rules, rental income is typically passive, meaning losses can only offset passive income. However, STRs can qualify as non-passive if:

1. The average guest stay is seven days or less, and

2. You materially participate in management (bookings, maintenance, or operations).

When these criteria are met, depreciation and cost segregation deductions can offset active income such as W-2 wages or business profits — producing substantial tax savings.

(Source: IRS Code §469; The Real Estate CPA)

Strategic Implementation Steps

1. Acquire in the right submarket: Choose neighborhoods with strong seasonal demand and appreciation potential.

2. Engage a qualified cost segregation specialist: Use an engineering-based study to properly document and allocate asset classes.

3. Work with a tax advisor experienced in STR rules: Ensure accurate reporting and non-passive qualification if eligible.

4. Track stays and participation: Maintain logs to support IRS compliance and substantiate active management.

Summary Table: Tax Efficiency by Property Type

Key Takeaways

✅ Park City STRs remain among Utah’s strongest investment plays, driven by global tourism and limited inventory.
✅ Cost segregation studies can unlock six-figure first-year deductions for qualified properties.
✅ Property type, price point, and STR classification determine the scale of tax advantages.
✅ Partnering with a seasoned CPA and real estate advisor ensures compliance and optimization.

FAQ

Q: Can I perform a cost segregation study after owning the property for several years?
Yes. A “look-back” study can be done retroactively using IRS Form 3115 to claim missed depreciation in a single tax year.

Q: Do I need to rent the property all year to qualify?
No, but maintaining active participation and short average stays is key to claiming non-passive losses.

Q: Are cost segregation studies expensive?
Professional studies typically cost between $5,000 and $10,000, but the tax savings often exceed the fee many times over.

Final Thoughts

Owning a short-term rental in Park City offers far more than vacation income — it’s a path to wealth creation and strategic tax efficiency. When you combine an in-demand location with a professional cost segregation study and proper tax planning, you can substantially improve your after-tax returns while building long-term equity in one of Utah’s most resilient markets.

By Wayne Levinson, Investor and Park City Real Estate Advisor

For insights on Park City STR opportunities and cost segregation strategy, connect with Wayne Levinson — helping investors unlock cash flow and tax-efficient real estate growth in Utah’s premier mountain market.