"In Use" date for tax deductions - furniture

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"In Use" date for tax deductions - furniture

AJ D.
Member since 2023 · 11 posts · 5 votes

I understand the IRS views the first day of your rental to be when it's available for use (not when you purchase) but how does this impact business/tax deductions?
For example - I have a rental property that is put in-use on July 1st, but I bought furniture throughout the months of May and June. Is this furniture able to fall under the de minimus safe harbor even though it was purchased before the officail "in-use" date? If not, how do rental property owners tend to deduct furniture and other appliances that are purchased before the formal in-use date?

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Joseph PalmieroBusiness Member
CPA · PA · Member since 2023 · 151 posts · 115 votes
3y

No de minimus safe harbor until after the property is placed into service.  You will be able to take bonus depreciation on furnitue and appliances.

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  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    3y

    Is there a CPA in the house @ryan bakke

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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    3y

    @AJ D.

    I'm not sure about personal items such as furniture..  Generally, before the property is put into use, capital upgrades go towards the cost basis.  Afterwards, repairs are deducted and capital upgrades are either deducted or depreciated.  I would guess that personal items would still be deducted

    Consult a qualified professional for details.

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  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y

    Hey @AJ D., you really need to ask a CPA on this, but I believe that you can't officially deduct those expenses.

    We put our place "in service" before it was really ready just to capitalize on the deductions for all the work. We did rent it to guests, but they were folks we knew to get their feedback before going live on VRBO and AirBNB.

    Still, check with a STR savvy CPA.

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  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    You would need to keep track of all purchases before it was placed into service. Let’s say you purchased $10,000 of furniture before you advertised for rent on 9/1. You would start depreciating the furniture on 9/1. If 2022, you get 100% bonus depreciation for furniture. If 2023, you get 80% bonus depreciation. 

    de minimis safe harbor election only applies once the property is placed in service.


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  • AJ D.
    OP
    Member since 2023 · 11 posts · 5 votes
    3y
    Quote from @Aaron Zimmerman:

    You would need to keep track of all purchases before it was placed into service. Let’s say you purchased $10,000 of furniture before you advertised for rent on 9/1. You would start depreciating the furniture on 9/1. If 2022, you get 100% bonus depreciation for furniture. If 2023, you get 80% bonus depreciation. 

    de minimis safe harbor election only applies once the property is placed in service.



     thank you!

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  • AJ D.
    OP
    Member since 2023 · 11 posts · 5 votes
    3y
    Quote from @Michael Baum:

    Hey @AJ D., you really need to ask a CPA on this, but I believe that you can't officially deduct those expenses.

    We put our place "in service" before it was really ready just to capitalize on the deductions for all the work. We did rent it to guests, but they were folks we knew to get their feedback before going live on VRBO and AirBNB.

    Still, check with a STR savvy CPA.


     Thanks for the insight, much appreciated!

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  • Joseph PalmieroBusiness Member
    CPA · PA · Member since 2023 · 151 posts · 115 votes
    3y

    No de minimus safe harbor until after the property is placed into service.  You will be able to take bonus depreciation on furnitue and appliances.

    [email protected]814-720-2493
    Palmiero CPA, LLC51 Review
    WebsiteView Page
    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    You would put the furniture into place during the date where it was available for its intended use, in this case, July 1st.

    You will likely be eligible to take bonus depreciation at the federal level which will depreciate most of the asset price.
    There may be some state add-backs as most states do not recognize bonus depreciation.

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  • John Malone
    Attorney · Boston, MA · Member since 2023 · 140 posts · 75 votes
    3y

    @AJ D. July 1 would be the date!

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