Can I depreciate my old personal furniture used in a rental property? Tax deduction question

Thanks for the info. Should I be getting professional appraisals of all my furniture to determine fair market value or can I just look up comparable used items online to estimate? Also, what about small stuff like dishes, silverware, lamps, etc? Do I depreciate every little thing or is there some minimum value?

For establishing fair market values, you don't need professional appraisals in most cases. Looking up comparable used items online from places like Facebook Marketplace, Craigslist, or secondhand stores is a reasonable approach. Take screenshots or make notes of your research as documentation. For small items like dishes, silverware, and other minor household goods, you have a couple of options. You can group similar items together as a single "set" for depreciation purposes rather than listing every fork and spoon individually. Alternatively, for truly low-value items (under $200 each), you might be eligible to use de minimis safe harbor election which lets you deduct the full amount in the first year rather than depreciating over time.

Does this taxr.ai thing work if I don't have any photos of some items? I rented out my house furnished but didn't think to take pictures of everything beforehand. Also wondering if they help with partial year calculations since I only started renting midway through 2023?

I'm skeptical about these "magic" tax tools. How accurate is it really? My accountant charges me $300/hr and says determining depreciation values requires professional judgment. No offense but how does some website know the difference between my West Elm couch and some IKEA thing?

You don't necessarily need photos - you can enter descriptions of the items, and the system can still help estimate values based on that information. And yes, it definitely handles partial year calculations! That's actually one of the things I found most helpful since I also started renting midway through the year and was confused about how to prorate the depreciation amounts. The accuracy is surprisingly good. It uses a combination of data from various resale marketplaces and depreciation models specific to household items. It's not just guessing - it's using actual market data. While your West Elm couch will definitely be valued differently than an IKEA one if you provide that brand information. My accountant was initially skeptical too but ended up being impressed with how well-documented everything was compared to his other clients.

How does this even work? I'm confused. Are they somehow jumping ahead in the IRS phone queue or do they just have a bunch of people calling the IRS all day? Seems weird that some company can get through when regular people can't.

This sounds like a scam. No way to skip the IRS phone line. I've been dealing with rentals for 10 years and EVERYONE has to wait. Plus why would you even need to call IRS about this? Publication 527 covers rental depreciation clearly. Sounds like you're just advertising.

It's not jumping ahead in the queue - they use an automated system that calls and waits in the IRS queue, then connects you once they reach a representative. Basically, their technology handles the waiting part so you don't have to stay on the phone for hours. You just get called when they reach a human. I thought it might be a gimmick too, but Publication 527 doesn't specifically address my situation which involved partially converted space and some unique circumstances. I needed clarification on how to properly allocate basis between personal and rental use when the conversion happened mid-year. The IRS agent provided guidance that wasn't clearly spelled out in any of the publications I read, and it potentially saved me from making a significant reporting error.

What happens if your tenant damages furniture beyond repair? My renters destroyed an expensive coffee table that I was depreciating. Do I get any kind of "loss" deduction for that or just stop depreciating it? Also can I deduct the cost of the replacement table immediately or do I have to depreciate that too?

If a tenant damages furniture beyond repair, you can claim a casualty loss deduction for the remaining undepreciated value of the item. You'll need to remove it from your depreciation schedule and report the disposition on your tax return. This is actually one of the few situations where you can recapture some value right away instead of over the full depreciation period. For the replacement table, you'll need to depreciate it just like any new asset for your rental business. You can't deduct it all immediately unless you use a special election like Section 179 or de minimis safe harbor (which has limitations). The new item goes on your depreciation schedule with its own 5-year timeline starting when you place it in service.

I use TurboTax Home & Business for my two rental properties and it works fine. It walks you through the depreciation stuff and has a section specifically for listing personal property converted to rental use. Just be organized before you start - have all your item values and dates ready. The interface for entering multiple depreciable assets is a bit clunky but it gets the job done.

Thanks for the info about TurboTax! That's good to know it can handle the rental property stuff without needing to pay for a CPA. I'll definitely make sure to have all my values and dates organized before starting. Do you think I need to separate out every single thing or can I group items together? Like could I just do one entry for "bedroom furniture" instead of listing bed, dresser, nightstands separately? That would save so much time.

You can definitely group similar items together in most cases! For example, "bedroom furniture set" or "living room furniture" works fine as long as the items have similar useful lives and depreciation periods. This is actually what most tax professionals recommend to avoid getting bogged down in excessive detail. Just make sure you keep detailed backup records showing what's included in each group in case you ever need to dispose of individual items later. I learned this the hard way when I had to replace just one item from a grouped entry and had to go back and figure out how to split it up properly. The IRS doesn't require you to list every single fork and lampshade separately - they care more about reasonable accuracy than exhaustive detail.

This is such an important point that I wish I had understood earlier! When I first started depreciating my rental furniture, I was only thinking about the immediate tax benefits and didn't realize I'd have to pay it back later as ordinary income. One thing I learned is that you can potentially avoid some depreciation recapture by doing a 1031 like-kind exchange when you sell, but that only works if you're buying another rental property. If you're just cashing out, you'll definitely face that recapture. Your advice about only depreciating items you're committed to keeping as rental assets is spot on. I made the mistake of depreciating some electronics that I later wanted back for personal use, and untangling that mess with my accountant was not fun. Now I keep a clear separation between "rental forever" items and anything I might want back someday.

Great point about depreciation recapture! I'm dealing with this exact situation right now as I'm considering selling my rental property in a few years. One thing my CPA mentioned is that you're actually required to recapture depreciation even if you never claimed it - the IRS assumes you took the deduction whether you did or not. So there's really no benefit to skipping the depreciation deductions. Also wanted to add that if you do a partial conversion back to personal use (like moving back into part of the property), the depreciation recapture calculation gets really complex. You have to allocate between the business and personal portions. I'm keeping meticulous records of everything just in case I need to unwind some of this later. Your advice about being selective with what you depreciate is smart. I only depreciated the big ticket items that I knew would stay with the property long-term, and I'm glad I kept my personal electronics and smaller items separate from the rental business.