Depreciating or deducting furniture when renting one room out?

[dmcy22]

I purchased a two bedroom home. I live in one of the rooms and rent out the other.

I purchased all the furniture in the common area, dining room table, couch, TV, etc., when I moved in. And these items are mentioned in the lease.

Am I able to deduct or depreciate 1/2 of the cost of those? If so, where would I do this? 

Thanks in advance!

[Carl]

Furniture to be depreciated is entered in the assets/depreciation section.

Just my two cents, but overall, you may find this more of a PITA than it's worth. When depreciating furniture, every time you get rid of a piece for any reason, or acquire a new piece, the tracking of it all has the potential to become a nightmare. You'll also find that depreciating such a low cost item has little to no impact on your tax liability. (More commonly, no impact at all) until the year you sell or dispose of the property. That's when you feel it - and usually not in a positive way.

Remember, depreciation is not a permanent deduction. You have have to recapture that depreciation and pay taxes on it, in the tax year you dispose of the property. Additionally, the recaptured depreciation is added to your AGI and can have the potential to bump you into the next higher tax bracket. So what you may think you are saving now, you *will* pay for 2 or more times over in the future.

[AmeliesUncle]

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@dmcy22 wrote:

Am I able to deduct or depreciate 1/2 of the cost of those? If so, where would I do this? 

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Yes, you can deduct or depreciate the business percentage, and that likely seems to be 50%.

Furniture $200 and less can be deducted.  If you qualify for and make the "De Minimis election", you may be able to deduct furniture that costs up to $2500.  Otherwise, it would be depreciated (usually over 5 years).

[Carl]

@AmeliesUncle I'm not sure, but I do believe that an asset that is less than 100% business use can not be deducted under safe harbor.

[AmeliesUncle]

There is no restriction in that regard. 

But there may be a "gray area" for amounts of the threshold.  For example, let's say an item costs $3000 and is 50% business use, would it qualify or not?  The full cost is $3000, which would not qualify.  But the business Basis would be $1500, which could potentially qualify.  So that is a bit of a questionable situation.

[dmcy22]

Thanks all. This is what I found on the IRS site:

> You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes.

https://www.irs.gov/publications/p527#en_US_2020_publink[phone number removed]

Based on this and what was said in the thread, I've done the following:

• Made the de minimus safe harbor election. I did this by saying I want to review my annual election questions and selecting "Yes" when it asked if I purchased items that were less than $2,500 and then I proceeded to follow the rest of the prompts.
• I added the items listed in the lease as miscellaneous expenses. I divided the cost of each item by 2 since only half of it is used for rental purposes. I do have a sofa which is over $2,500 but when divided by 2 is less than that.

Follow up question: What if I purchased an item in 2019, but did not use it until I moved into my home? 

[Carl]

What if I purchased an item in 2019, but did not use it until I moved into my home?

Depreciation starts when you place an asset in service as a rental asset; doesn't matter when you acquired or purchased it. The value used for depreciation is the *LESSER* of what you paid for it, or it's fair market value on the date you placed it in service.