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tsmurphygirl
Level 2

Rental property depreciation

We converted our main home into a rental home in July of 2019. I understand how to depreciate just the property (house, not the land), but how do I/can I depreciate the things left in the house for the tenants to use. We left a basement home theater (all electronics, screen, seating), a fully furnished gym (electronics and equipment), fully furnished bedroom, as well as TVs....I guess you could say we rented it out with a fully furnished basement. Would I need to break down individual assets with the original price, or could I generalize (ex. home theater $$$). Would I use the original purchase price of the equipment, even if it was purchased 5 years ago? Can I/should I do this? Thank you for your time; this is our first time renting out our home while we are out of state.

7 Replies
Critter
Level 15

Rental property depreciation

If you plan to come back then I would not bother depreciating the furnishings ... however if you do you would use the current depreciated value of the property at conversion ... just make one category for all the appliances and one for all the furnishings.   Follow the program for non real estate asset depreciation. 

tsmurphygirl
Level 2

Rental property depreciation

Got it; thank you!  I was wondering if it would even be worth it.  This is our retirement home, so we will definitely be returning to it.

Critter
Level 15

Rental property depreciation

Personally I would not bother. 

Carl
Level 15

Rental property depreciation

Be careful hare. Some states and many localities assess a "tangible property tax" each and every year on non-real estate equipment that is used to produce income. At best, your furniture and equipment is depreciated over 5 years. The tangible property tax if imposed, negates any savings you may realize by doing this too. On top of that, when you sell or otherwise dispose of those assets, you are required by law to recapture all depreciation taken and pay taxes on it in the year of disposition.

The main reason I wouldn't waste my time with this, is because it is extremely rare for residential rental property to produce taxable income anyway. Espeically if there's a mortgage on the property.

When you add up the mortgage interest deductions, property tax deduction, insurance deduction and the depreciation you're required to take by law, you'll find that all those deductions by themselves will exceed the rental income for the year.  Add to that your other allowed rental expenses (repairs, cleaning, maintenance, etc) and you're practically guaranteed to "never" have a taxable profit on residential rental real estate.

So capitalizing other non-real estate assets has absolutely no positive impact what-so-ever on your tax liability.  But it *will* negatively impact your tax liability in the tax year you sell or otherwise dispose of the property.

 

tsmurphygirl
Level 2

Rental property depreciation

Thank you for the thorough explanation; it was exactly what I was looking for!

cptnbob2019
New Member

Rental property depreciation

depreciate new stove in rental property

MaryK4
Employee Tax Expert

Rental property depreciation

@cptnbob2019  If you are adding a new stove you got in 2019 for your rental property, you will add as a new asset.  The De Minimis Safe Harbor Election is an option you can take each year that lets you write off items $2,500 or less as expenses instead of assets or you can depreciate as a five year asset under Appliances, Carpet, Furniture.  

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