Short-term rental tax question: Can I just depreciate all purchases instead of separating deductible items?

Thanks for the info. Does the de minimis safe harbor apply to vacation rentals specifically? And how exactly do I make that election? Is it just a form I fill out or something I need to include with my return?

The de minimis safe harbor election does apply to vacation rentals since they're considered business property. To make the election, you simply attach a statement to your tax return for the year stating that you're making the "de minimis safe harbor election under Reg. 1.263(a)-1(f)." The statement should include your name, address, taxpayer ID, and the total amount deducted under this safe harbor. You do need to have an applicable financial statement or a written accounting policy in place at the beginning of the tax year to qualify for the $2,500 threshold. Without these, the threshold is $500 per item or invoice. You'll need to maintain records of these expenses, but you won't need to track them as depreciable assets going forward.

Does it actually work with messy receipts? I've got a stack of crumpled Home Depot and IKEA receipts that I've been dreading sorting through. Does the AI actually understand what each item is?

That sounds interesting but also kinda sketchy. How do you know their categorizations are accurate? Do they have actual tax pros reviewing the AI's work? I'd be worried about getting audited if a computer is making all these decisions.

It absolutely works with messy receipts. The AI is surprisingly good at identifying what items are, even with weird abbreviations on receipts. You can also review and adjust if anything seems off, but it was accurate for most of my stuff. They do have tax professionals who oversee the system and can review complex situations. The AI makes initial categorizations based on tax rules, but there's human oversight. I was skeptical too, but they explain their reasoning for each categorization, citing the relevant tax code. That transparency gave me confidence it wasn't just making things up.

How exactly does this work? Do they just call the IRS for you? Couldn't I just do that myself?

Yeah right. Nobody can get through to the IRS these days. I've spent literal HOURS on hold only to get disconnected. No way they're magically getting through when millions of people can't.

They use a system that navigates the IRS phone tree and waits on hold for you. When an agent picks up, you get a call connecting you directly. You don't have to sit through the hold music and automated messages. I was extremely skeptical too. I had tried calling the IRS four separate times and spent over 2 hours on hold each time, often getting disconnected. I figured I had nothing to lose by trying Claimyr. It actually worked - I got a call back when an agent was on the line, and I got my questions answered in one session. The agent spent almost 25 minutes explaining exactly how to handle my rental property depreciation questions.

Yes, personal use absolutely changes things! If you use the property personally for more than 14 days OR more than 10% of the total days it's rented (whichever is greater), it's considered a mixed-use property. This means you need to allocate expenses between personal and rental use. Only the rental portion can be deducted. For example, if you use it 10% of the time personally, you can only deduct 90% of eligible expenses. You'll need to maintain careful records of personal vs. rental days.

Thanks for explaining! So if I stay there for 14 days exactly and rent it out for 200 days, I should be okay to deduct expenses fully without allocation? And what about days when it's vacant but available for rent - how are those counted?

If you use it for exactly 14 days and rent it for 200 days, you're just at the limit. Since 14 days is less than 10% of your rental days (10% of 200 would be 20 days), you're good to deduct eligible expenses fully. Days when the property is vacant but genuinely available for rent count as rental days, not personal days. This means listed on rental platforms, actively marketed, not blocked off for personal use, etc. The IRS looks at your efforts to rent it during those periods. Just make sure you keep documentation showing it was available for rent during vacant periods (listing screenshots, marketing efforts, etc.).

That's a good tip! Do you find it accurately categorizes most expenses automatically or do you have to manually sort most things? And how does it handle mixed receipts where I buy both types of items in one transaction?

It does attempt some automatic categorization based on the vendor, but for mixed receipts, you'll need to split the transaction manually. What I usually do is take a photo of the receipt right after purchase, then when I'm back home, I'll go through and split any mixed transactions into their proper categories. For example, if I spend $500 at Home Depot and $300 was for a new refrigerator (depreciable) while $200 was for cleaning supplies (immediate expense), I just split the transaction and categorize each part properly. Takes a bit of discipline to keep up with, but WAY easier than sorting through a year's worth of receipts at tax time!

This is really helpful information about Section 195! I hadn't even considered that some of my initial $75k in expenses might qualify as startup costs rather than regular rental expenses. Since I'm over the $50k threshold, I'm assuming I won't get the immediate $5,000 deduction, but understanding the 15-year amortization could still be valuable. Quick question - how do I determine what counts as "startup costs" versus regular operating expenses? For example, would the initial furniture purchases to furnish the property be considered startup costs since they were needed to get the rental ready, or would they still be regular depreciable assets? And does it matter that I've already been renting the property for several months now? Also, thanks for mentioning the passive activity loss rules. My AGI is definitely under $100k, so that $25,000 allowance could make a real difference in whether I prioritize immediate expensing or depreciation for borderline items.