You've found the perfect Texas property for your short-term rental business, whether it's a downtown Austin condo, a lakeside Hill Country retreat, or a chic Dallas apartment. Now comes the exciting (but expensive) part: furnishing it. As you browse sectional sofas, dining sets, and artwork, that nagging question arises: "I'm spending thousands on furniture. How can I recover this investment?" In competitive Texas markets, high-quality furnishings are essential for attracting premium guests and commanding top rates.

The IRS offers methods for writing off furniture for a rental property in Texas. These tax benefits can improve your investment returns, and navigating the rules can feel like driving through Houston traffic during rush hour, confusing and risky without guidance. This guide breaks down your options in plain English, helping you understand how to maximize your deductions.

Surge, a company specializing in designing, furnishing, and managing high-performing short-term rentals in Texas, guides investors through this process daily. We created this resource to help you understand the tax implications of furnishing your rental property.

Understanding Furniture Cost Tax Treatment

Before diving into tax strategies, let's establish some fundamental concepts to navigate these waters confidently.

When you purchase furniture for your rental property, the IRS views it as a capital expense, an asset that provides value to your business for multiple years. This classification is crucial because capital expenses must be deducted over time through depreciation, unlike ordinary expenses that can be fully deducted in the year they're incurred.

Two critical concepts are basis and placed in service date. Your basis is the total cost to acquire the furniture, including the purchase price, sales tax, delivery fees, and setup costs. For example, if you buy a $2,000 sofa, pay $160 in sales tax, and spend $100 on delivery, your basis is $2,260. This total amount forms the foundation for your deduction calculations. The placed in service date marks when the furniture is ready and available for use in your rental business, typically when your property is ready for guests. This date, not the purchase date, determines when you can start claiming deductions.

None of these deductions are possible without meticulous record-keeping. The IRS requires substantiation of all claimed expenses. Maintain digital and physical copies of every receipt, invoice, and proof of payment for all furniture and decor purchases. Create a spreadsheet that categorizes each item’s cost, purchase date, and placed-in-service date. This documentation will be invaluable for your tax return and essential for an audit.

Method 1: The Standard Approach, Depreciation via MACRS

The default method for writing off furniture is through depreciation using the Modified Accelerated Cost Recovery System (MACRS). Depreciation spreads the deduction over the asset's "useful life" defined by the IRS, instead of deducting the entire cost in the purchase year.

Think of depreciation as getting a portion of your investment back on your taxes each year for several years. The IRS acknowledges that furniture doesn't last forever and allows you to recover its cost gradually as it wears out.

For tax purposes, furniture, appliances, carpets, and most decorative items in a residential rental property fall into the 5-year property class under MACRS. This classification is crucial for you and your CPA when calculating your annual deductions.

Example of 5-Year Depreciation using MACRS

Scenario: You spend $20,000 on furniture for your San Antonio Riverwalk Airbnb.

Under MACRS, you wouldn't deduct the full $20,000 in Year 1. Instead, you'd deduct a specific percentage of the cost each year for 5-6 years (due to tax conventions). Your CPA will use IRS tables to calculate the exact amount, but it provides a steady, predictable deduction over time. In the first year, you might deduct 20% of the cost, or about $4,000.

Accelerating Deductions How to Expense Furniture in Year 1

While the default method is standard depreciation, most savvy Texas short-term rental investors prefer to maximize their deductions immediately to improve first-year cash flow. The following three methods offer powerful alternatives to accelerate your furniture deductions.

Option A: The De Minimis Safe Harbor (DMSH) for Small-Ticket Items

The De Minimis Safe Harbor (DMSH) election allows you to expense lower-cost items in the purchase year instead of depreciating them. This is the "small stuff" rule; it lets you immediately write off individual items below a certain threshold.

The election specifics are straightforward and must be followed precisely:

• You can expense any item or invoice that costs $2,500 or less (for the 2024 tax year).
• This is an annual election on your tax return.

You must have a written accounting policy in place at the beginning of the tax year that treats items under a certain dollar amount as expenses rather than capital items to use this.

You can expense the $300 bar stools, $150 lamps, and $800 area rug for your Austin rental immediately. However, your $4,000 sectional sofa doesn’t qualify.

Option B: The Section 179 Deduction for Major Purchases

The Section 179 deduction is a powerful tax incentive to encourage businesses to invest in themselves. It allows you to expense the entire cost of qualifying property, including all your STR furniture, in the year it's placed in service, rather than depreciating it over time.

There are important limitations and requirements:

• For the 2025 tax year, the total Section 179 deduction limit is $1,220,000, far more than most STR owners will spend on furnishings.
• For 2025, the total equipment purchase limit before phase-out is $3,050,000.

The property must be used over 50% for business, which is straightforward for a dedicated short-term rental. Most importantly, the Section 179 deduction cannot create a business loss, you must have net business income to take it.

Option C: Bonus Depreciation for Maximum First-Year Impact

Bonus Depreciation is another tool for accelerating deductions. It allows for an increased first-year deduction, similar to Section 179, but with important differences.

For property placed in service in 2024, the bonus depreciation rate is 60% of the purchase price. This is part of a phase-down schedule from the Tax Cuts and Jobs Act. The rate will decrease to 40% in 2025, 20% in 2026, and then expire unless Congress extends it.

Two key differences between Bonus Depreciation and Section 179 to discuss with your CPA:

1. Bonus depreciation can create a net business loss that offsets other income.
2. It applies automatically to eligible property unless you opt out, whereas Section 179 must be elected.

Smart Furnishing is More Than a Tax Deduction

Understanding your tax options is critical. The right furniture does more than save you money on taxes; it makes you money. Strategic furnishing decisions impact your rental's performance metrics, including average nightly rate, occupancy percentage, and guest reviews.

At Surge, we specialize in an integrated design-and-furnish service focusing on ROI for Texas short-term rentals. Our designers create durable, functional, and stylish "Instagrammable" spaces to drive higher nightly rates and occupancy. We select furniture that balances aesthetics with longevity, ensuring your investment withstands guest turnover while maintaining visual appeal.

Instead of juggling receipts from multiple vendors and wondering if you've chosen the right assets, partner with an expert to create a profitable, turnkey rental from day one. We handle the entire procurement and installation process, providing you with a single, detailed invoice, making record-keeping simple for your CPA. We build the foundation for a successful STR business, and you and your CPA handle the tax strategy.

Final Steps for Deducting Furniture

Writing off furniture for a Texas rental property offers several options, each with advantages. Choosing between standard depreciation, De Minimis Safe Harbor, Section 179, or Bonus Depreciation depends on your financial situation, tax bracket, and investment goals.

Before you finalize your strategy:

• Keep all receipts, invoices, and proof of payment.
• Calculate your total "basis" for each furniture item or purchase.
• Document when your property was "placed in service."
• Discuss all four options (MACRS, DMSH, Sec. 179, Bonus) with a qualified tax professional.
• Consider how your furnishing choices affect your tax situation and property's earning potential.

Conclusion

Furnishing your Texas short-term rental is one of the most creative and exciting parts of launching your business. It can also be financially rewarding with the right tax strategy. By understanding the methods for writing off furniture for a rental property in Texas, you're equipped to have a productive conversation with your tax professional and make informed investment decisions.

Are you ready to build a profitable short-term rental in Texas? Contact Surge to learn about our all-in-one design, furnishing, and management services that maximize your property's appeal and your profits.