Furniture, Fixtures, and Equipment in a Short-Term Rental: What Depreciates Fast and What Does Not
The Deduction Owners Already Have and Do Not Claim
A short-term rental is furnished. A long-term rental usually is not. That single operational difference creates a category of deduction that many STR owners either capitalize into the building by mistake or expense inconsistently across years.
Furniture, fixtures, and equipment, commonly abbreviated FF&E, is tangible personal property under Section 1245. It carries a 5-year or 7-year MACRS recovery period, and it is bonus depreciation eligible, which means it is generally fully deductible in the year placed in service.
On a typical three-bedroom short-term rental, a full furnishing package runs $25,000 to $60,000. That is a first-year deduction sitting in an owner's credit card statements, and it is entirely separate from anything a cost segregation study produces on the building.
What Falls Into the 5-Year and 7-Year Buckets
Under the MACRS asset class system, furniture and fixtures used in a rental activity generally land in the 7-year class, while appliances, carpeting, and certain equipment used in residential rental activity land in the 5-year class.
Practically, the 5-year bucket picks up refrigerators, ranges, dishwashers, washers and dryers, microwaves, window air conditioning units, carpeting and area rugs, televisions, and computer and networking equipment including smart locks, routers, and security cameras.
The 7-year bucket picks up beds, mattresses, sofas, dining sets, desks, dressers, patio furniture, and decorative fixtures that are not permanently attached. Outdoor equipment such as grills, fire pits, and hot tubs that are not permanently installed generally follows here as well.
The Line Between FF&E and the Building
The classification question is whether an item is a component of the building or personal property that happens to be inside it. Permanence, method of attachment, and whether removal would damage the structure all matter.
A freestanding refrigerator is personal property. Built-in cabinetry is generally a building component. A wall-mounted television is personal property; the recessed niche and blocking installed to hold it may not be. A hot tub set on a pad is personal property; one integrated into a deck with dedicated plumbing and electrical runs closer to a land improvement or building component.
This is precisely the analysis a cost segregation engineer performs on the building itself, and it is why studies on short-term rentals reclassify more than studies on comparable long-term rentals. The property is simply built out with more removable content.
Items Purchased Before Placing the Property in Service
A common sequencing issue: you buy the property in March, furnish it through April and May, and take the first booking in June. The furniture purchased in April was not placed in service when purchased. It was placed in service when the property became available for rent.
That timing matters for the placed-in-service date, for the mid-quarter convention test, and for which tax year the deduction lands in. Purchases made in a prior tax year but placed in service in the current year are deducted in the current year.
It also matters for what gets capitalized. Costs incurred to make the property ready for its intended use are generally capitalized into basis rather than expensed, though FF&E retains its own class life rather than folding into the 27.5-year or 39-year structure.
The De Minimis Safe Harbor as an Alternative Path
The tangible property regulations provide a de minimis safe harbor election under Regulation 1.263(a)-1(f) that lets taxpayers expense items under a per-item or per-invoice threshold, $2,500 for taxpayers without an applicable financial statement, $5,000 for those with one.
For a short-term rental, most individual furniture and appliance purchases fall under $2,500. Electing the safe harbor lets you expense them directly rather than tracking them on a depreciation schedule for seven years.
The election is annual, made on a timely filed return, and requires a written accounting policy in place at the start of the year. It does not replace a cost segregation study, which addresses the building, but it dramatically simplifies the FF&E side and produces the same current-year result while bonus depreciation is at 100 percent.
Replacement Cycles and Partial Dispositions
Short-term rental FF&E wears out fast. Mattresses, sofas, and linens on a well-booked property have a real life closer to three years than seven, and owners replace them regularly.
When you replace an item that has not been fully depreciated, you dispose of the old asset and recognize the remaining basis as a loss, then place the new asset in service. This is straightforward for tracked assets and impossible for untracked ones, which is an argument for maintaining a real fixed asset schedule rather than a shoebox.
The same concept applies at the building level through partial asset disposition elections, which let you write off the remaining basis of a replaced roof or HVAC system rather than depreciating a component that no longer exists.
Coordinating FF&E With the Building Study
The cleanest approach is to treat them as two workstreams. The cost segregation study handles the acquisition basis of the building and site. A separate fixed asset schedule handles the furnishing package and subsequent capital purchases.
Owners run into trouble when the furnishing package gets folded into the building basis at closing, typically because the seller included furnishings in the sale. In that case, the purchase price allocation needs to separate the personal property, and the study should identify it explicitly rather than burying it in the structural component.
Whether the resulting loss is currently usable still depends on material participation and the passive activity rules. AE Tax Advisors covers that interaction in their short-term rental tax and rental property tax planning resources.