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Tax Planning/Second Home Tax Treatment of Furniture


Hello, we are purchasing a vacation home that will be rented out part of the year so for tax purposes treated as hybrid property (investment and personal use).  The home will need appliances and furniture.  I am debating if it is better to get the seller to put a furniture allowance in the sales price or sell empty and then I buy furniture.  

1. Are appliances and furniture capital costs and need to be depreciated?
2. Do I get to fully depreciate the furniture as a business expense, since needed for a rental?  Or is it a shared expense.   
3. how do I allocate the depreciation share to business and personal since this will vary each year.  Do I use the following formula (cap inv x MACRS Deprc % x property business use % for the year)?  Thanks for the help!

Nathan - When you have a vacation home that is rented out, you would state on Schedule E how many days of personal use was used in that year.  You would already have capitalized the improvement and any items in the residence that are of a capital nature.  You would then apply the percentage of use as a rental to those items.  You would get a varying percentage each year of the total allowable amount of depreciation for that year.

I hope that helps!

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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