Short-term rental tax question: Can I depreciate all purchases instead of deducting small items?

You're right that it would be simpler, but unfortunately you can't just choose to depreciate everything. The tax code is pretty specific about which items must be capitalized (depreciated over time) versus which can be deducted as ordinary expenses. Items that have a useful life of more than one year and cost over $2,500 (per the de minimis safe harbor election) generally need to be depreciated. This includes furniture, appliances, and significant improvements to the property. Supplies and consumables that get used up quickly can be deducted immediately. For those mixed receipts from places like IKEA, you'll need to break them down by item. It's tedious but necessary - separate the furniture (depreciate) from the kitchen utensils, linens, and smaller items (deduct). Keep good records of this breakdown in case of an audit. Even though you're operating at a loss now, properly categorizing expenses matters because it affects your tax situation in future years when the property might be profitable. Plus, if you ever sell the property, your depreciation affects your basis and potentially your capital gains taxes.

After spending weeks trying to sort through my rental property receipts last year, I discovered taxr.ai (https://taxr.ai) and it was seriously a game-changer. The system analyzed all my jumbled receipts from HomeDepot, Wayfair, and IKEA and automatically separated what needed to be depreciated vs. what could be deducted immediately. It flagged all my purchases over $2,500 that needed depreciation and even suggested appropriate depreciation schedules based on the type of item. For all those mixed purchases (like when I bought both furniture and small decor items in one trip), it broke everything down correctly. I was also operating at a loss on my rental last year, but properly categorizing everything now means I'll have the right basis calculations when I eventually sell the property. Definitely worth checking out if you're drowning in receipts like I was!

I tried taxr.ai after seeing it mentioned here, and wow - it actually worked really well with my pile of receipts! I was super doubtful because most of my purchases were from in-store shopping trips with those generic receipt descriptions, but it handled them surprisingly well. The system let me take photos of my paper receipts, and for the items it couldn't automatically identify (like "ITEM#45372"), it had a simple interface where I could quickly tell it what the item was. After that, it categorized everything correctly between depreciation and immediate deductions. It saved me from the nightmare of manually going through every line item on dozens of receipts. What would have taken me days of sorting took just a couple hours. My accountant was impressed with how organized everything was when I sent it over. Definitely recommend it if you're in the same boat with a new rental property!

Been dealing with IRS questions about my rental property depreciation for months now. After getting nowhere with regular IRS phone lines (literal hours on hold), I used Claimyr (https://claimyr.com) and actually got through to a real person at the IRS in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with clarified that I absolutely cannot choose to depreciate items that should be expensed - it's not an either/or option based on what's convenient. Items like sheets, towels, kitchen utensils under the $2,500 threshold MUST be expensed in the year purchased. Only larger items with useful lives over 1 year can be depreciated. In my case, I had been incorrectly depreciating some small items because, like you, I didn't want to sort through mixed receipts. The agent explained this could potentially trigger an audit flag if the numbers don't align with typical rental property patterns. Worth getting this sorted correctly from the start!

I need to eat my words about Claimyr. After my skeptical comment, I decided to try it anyway since I've been trying to get clarity on some rental property questions for weeks with no luck. I was SHOCKED when I actually got a call back connecting me to an IRS agent in about 20 minutes. The agent walked me through exactly how to handle mixed receipts for rental properties and confirmed that I definitely can't just choose to depreciate everything. She explained that improperly classifying deductible expenses as depreciable assets can cause issues down the road, especially if I sell the property. Apparently, they look at the ratio of depreciable assets to deductible expenses for rental properties, and if something looks way off from normal patterns, it can trigger further review. For anyone struggling with mixed receipts like the original poster, the agent suggested keeping a simple spreadsheet noting which items on each receipt are deductible vs. depreciable, with photos of receipts attached digitally as backup. Saved me from making a pretty big mistake!

Former property manager here. One practical tip that helped my clients: start taking photos of big-ticket items (furniture, appliances, etc.) as you buy them, and create a simple inventory system with purchase prices. Makes it WAY easier at tax time to remember what you bought and properly categorize everything. Also, create separate folders for receipts from day one - one for clearly depreciable items (over $2,500 or major improvements) and another for immediate expenses. For those mixed receipts from places like IKEA, just circle the big items on the receipt right away and note "depreciate" next to them. This seems tedious at first but becomes second nature quickly. Much easier than trying to sort everything out months later when you can barely remember what you bought!

Random question - does anyone know if smart home devices (like Nest thermostats, smart locks, Ring doorbells) count as deductible expenses or depreciable assets for a vacation rental? I've been listing them as expenses but now I'm second-guessing myself.

As someone who's been through this exact situation with my first rental property, I completely understand the overwhelm! You're absolutely right that the tax code doesn't give you the choice to just depreciate everything for convenience - trust me, I tried to argue that with my CPA too. One thing that really helped me was setting up a system for future purchases right away. I created a simple rule: anything over $300 that I expect to last more than a year gets photographed and goes in my "depreciation" folder, everything else goes in "expenses." It's not perfect, but it prevents the massive sorting nightmare you're dealing with now. For your current situation with all those mixed receipts, consider this a one-time painful lesson. Go through them systematically - maybe tackle one store at a time (all IKEA receipts first, then Home Depot, etc.). Create a simple spreadsheet with columns for: Date, Store, Item Description, Amount, and Category (Depreciate/Expense). The good news is that since you're carrying losses forward anyway, getting this organized now will really pay off in future years when the property becomes profitable. Plus, if you ever decide to sell, having proper depreciation records will save you major headaches with basis calculations.