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George Saenz, the Bankrate.com Tax Talk columnistAllowable rental property deductions

Dear Tax Talk,
I purchased office furniture for $1,500 this year and purchased three investment/rental properties. I will use the office furniture to store all of the files related to the properties. Question: Can I write off the furniture as a tax write-off?
-- Christina

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Dear Christina,
In a rental property you can usually deduct the ordinary and necessary expenses associated with the rental activity. Most of these expenses are obvious, such as interest, taxes, maintenance and repairs. Some of the other expenses you can deduct are indirect, such as automobile expenses that are incurred to collect rental income or to manage, conserve or maintain your rental property. A part of office expenses would also be includable if the activity justifies maintaining an office for the properties (i.e., ordinary and necessary). The amount of the furniture expense appears reasonable, but I assume that the furniture will be in your home, so you'll need to show that the items are used exclusively for administering the properties. Otherwise, only an allocable part of the expense may be allowed.

Since investment property is not a trade or business, you must depreciate the furniture over its useful life. You cannot expense it in the year of purchase as Section 179 expense. Section 179 expense only applies to the active conduct of a trade or business. The useful life of furniture is seven years. The depreciation tables can be found on Page 14 of Publication 527.

To ask a question on Tax Talk, go to the "Ask the Experts" page, and select "taxes" as the topic.

Bankrate.com's corrections policy -- Posted: July 19, 2006
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