Short term rentals- Tax write off

3 Replies

I recently purchased a property for which I will be utilizing as a short term rental year round. I am buying a substantial amount of furniture for the unit and I am wondering if all of these things (beds, sofas, TV, nightstands etc) will be a tax write off? Maybe under the “supplies” section?

I know this is a question for my tax proffesional but would love to hear some feedback before I call him..

Hey there Rich, 

Full Disclosure: I own Hoasty.co and manage units across the USA. 

Now, depending on the level of investment you've made into the house we at Hoasty always suggest to our owners that they get a cost segregation analysis for their properties. As commercial real estate, you are looking at an amazing ability to write off between 20-40% of the entire purchase price + what ever you've spent furnishing the property. 

That means your furniture is effectively FREE. 

Although Hoasty is in no way tax professionals, we are great at helping our owners in every capacity of their properties especially when it comes to wealth preservation. 

Reach out to me and I'll connect you with my guy that I would suggest to do a Cost Segregation Analysis. Additionally, if you want to make sure your property is making as much as it possibly can, you can always submit it to Hoasty.co and we will pay for the AirDNA full report for you! 

Best of luck!

Typically furniture would be capitalized and depreciated over a 5 or 7 year 200 DB. With the new tax law, those can be bonuses by 100%. It would have the same effect as writing them off completely like an expense. 

Cost segregation is a tool that can help improve cash flow from a tax deduction basis, but I can also help with cash flow management as well. Segregating a property into difference depreciation schedules isn’t done arbitrarily. 5 yr property needs to be replaced every 5 yrs. This is not exact due to usage, but it can guide a property owner on when expenses may be coming due. This becomes especially costly when 3yr, 5yr, 7yr, & 15yr property all fall in the same year. As they say, cash it king. 

@Rich Thomas

Not a really heavy need to do a cost seg just for furniture if you're buying separately after the real property asset.

The invoices will break out the individual units of property and help your CPA determine treatment -- defeats the purpose of a cost seg since you already have the furniture broken out.  Usually it will be bonus depreciation or S179 to expense the furniture and other personal property (STRs commonly throw off high taxable income compared to tax loss thus S179 finds its way onto the table -- S179 might be preferable to bonus).

Cost seg still might be beneficial depending on the acquisition price.

Make sure you have a deep convo with your CPA regarding STRs (hint: they usually have an average rental period of less than 7 days).  They are treated differently than traditional rentals under the passive activity loss rules...