Tax Rules for Furnished Vacation Rentals

Published March 19, 2026  ·  9 min read

Virtually every Airbnb listing is a furnished rental — beds, couches, kitchen equipment, linens, smart TVs. The good news is that all of these furnishings create tax deductions. The rules around how and when to deduct them can save you significant money if you understand them correctly.

Furniture and Personal Property: How They Are Classified

For tax purposes, the assets in your Airbnb fall into distinct categories with different depreciation rules:

• The building/structure — 27.5-year straight-line depreciation (residential rental property)
• Furniture, appliances, and personal property — 5-year MACRS depreciation
• Carpeting and fixtures — typically 5 or 15-year MACRS depending on classification
• Land improvements (landscaping, driveways, fencing) — 15-year MACRS

The distinction matters because personal property depreciates much faster than the building — and is eligible for accelerated deductions that the building is not.

Three Ways to Deduct Furnishings

1. Standard MACRS Depreciation (5 Years)

Without any special elections, furniture and personal property used in a rental are depreciated over 5 years using the Modified Accelerated Cost Recovery System (MACRS). With the half-year convention, the deduction schedule looks like this for a $10,000 furniture purchase:

2. Section 179 Expensing

Section 179 allows you to deduct the full cost of qualifying property in the year it is placed in service, rather than depreciating it over multiple years. For 2025, the Section 179 deduction limit is $1,220,000. For rental property, Section 179 is limited to the income from the rental activity — you cannot use it to create or increase a loss. Most Airbnb hosts with positive rental income can use Section 179 to immediately expense furniture and appliances.

3. Bonus Depreciation

Bonus depreciation allows an additional first-year deduction on qualified property. Under the Tax Cuts and Jobs Act (TCJA), 100% bonus depreciation applied through 2022. The percentage has been phasing down: 80% for 2023, 60% for 2024, 40% for 2025, 20% for 2026. Unlike Section 179, bonus depreciation is not limited to income — it can create a loss.

4. De Minimis Safe Harbor ($2,500 Threshold)

Under IRS regulations (Reg. 1.263(a)-1(f)), taxpayers without applicable financial statements (AFS) can immediately expense tangible property costing $2,500 or less per item. This means most individual furnishings — a lamp ($150), a nightstand ($300), a coffee maker ($80) — can be expensed outright in the year of purchase without formal depreciation. Make the annual election on your tax return each year you want to use it.

What Counts as a Furnished Rental?

For tax purposes, almost every short-term rental is furnished. Common items that qualify as depreciable personal property:

• Beds, mattresses, and bed frames
• Sofas, chairs, dining tables, and other furniture
• Televisions, sound systems, and gaming consoles
• Kitchen appliances (refrigerator, microwave, coffee maker, etc.)
• Linens, towels, and pillows
• Artwork and decorative items
• Washer and dryer
• Outdoor furniture and grills
• Hot tub or spa equipment

Cost Segregation Studies

For hosts with expensive properties (generally $500,000+), a professional cost segregation study can reclassify portions of the building that would otherwise depreciate over 27.5 years into 5-year or 15-year personal property categories. This front-loads depreciation deductions significantly, creating larger deductions in early years. The study typically costs $3,000–$10,000 but can generate $20,000–$100,000+ in accelerated first-year deductions on large properties.

Does Furnishing Affect Schedule E vs. Schedule C Classification?

Simply furnishing the property does not move you from Schedule E to Schedule C. The classification depends on whether you provide substantial personal services to guests, not whether the property is furnished. Services that push toward Schedule C include:

• Daily or regular maid/cleaning service
• Providing meals
• Concierge or transportation services
• On-site management resembling a hotel

Providing a fully stocked kitchen, linens, and furniture is considered a standard amenity, not a "personal service." Most Airbnb hosts stay on Schedule E. For more detail, see our Schedule E guide for Airbnb hosts.

Depreciation Recapture When You Sell

All depreciation taken on personal property (furniture, appliances) during the rental period is subject to Section 1245 recapture when you sell the property. This means the depreciation is recaptured as ordinary income, taxed at your regular tax rate rather than the favorable capital gains rate. This is separate from the 25% Section 1250 unrecaptured depreciation on the building.

Tracking Furnished Rental Assets

Maintain a fixed asset register — a spreadsheet listing each depreciable item with its purchase date, cost, useful life, and annual depreciation. This is essential for:

• Accurately reporting depreciation each year
• Calculating gain or loss when you sell or dispose of an item
• Supporting your deductions if audited
• Knowing your basis when you eventually sell the property

Good record-keeping habits are outlined in our Airbnb record-keeping guide.

Sources: Internal Revenue Service (IRS) · Internal Revenue Service (IRS) · Internal Revenue Service (IRS). This article is for informational purposes only.