Appliance Depreciation on a Rental Property: 5 Years, Not 27.5

Appliances in a residential rental are 5-year property, not part of the 27.5-year building. IRS Publication 527, Table 2-1, lists appliances such as stoves and refrigerators as 5-year property under the General Depreciation System (9 years under the Alternative Depreciation System), and the text adds that the class “includes appliances, carpeting, and furniture used in a residential rental real estate activity.” Five years is well under the 20-year ceiling for bonus depreciation, so for property acquired and placed in service after January 19, 2025, the cost can usually be deducted in the first year.

That part is simple. What trips owners up is everything around it: the appliances that came with the house, the line between an appliance and a building system, and when you can skip depreciation and expense the purchase.

What counts as an appliance?

For depreciation, an appliance is equipment that serves the occupant rather than the building. Refrigerators, ranges and cooktops, wall ovens, dishwashers, built-in and countertop microwaves, range hoods, and washers and dryers are the common ones.

What does not count is anything that runs the building. A water heater, a furnace, a central air condenser and its ductwork, and the electrical panel are structural components of the 27.5-year building, even though people often call them appliances. A new HVAC system on a rental house is a 27.5-year improvement, not a 5-year one.

What happens to the appliances that came with the house?

This is where most of the money sits. When you buy a furnished or equipped rental, the appliances are part of the price, but the closing statement shows one number for the property. Your tax preparer splits land from building and puts the rest on the 27.5-year line, and the appliances go with it.

They are recovered at roughly 3.6 percent a year instead of over five years with bonus. A cost segregation study allocates the purchase price to each class, so the appliances, carpet, furniture and site improvements each land in their correct, shorter life. Our components list shows the full inventory a study looks for.

If you bought the property in an earlier year and never separated them, the deduction is not lost. A change in accounting method on Form 3115 can catch up the missed depreciation in the current year without amending old returns.

When can you simply expense an appliance?

Replacing a broken refrigerator between tenants rarely needs a depreciation schedule. The de minimis safe harbor in Treas. Reg. §1.263(a)-1(f) lets a taxpayer without an applicable financial statement deduct items costing $2,500 or less per invoice or per item. You make the election each year by attaching a statement to a timely filed return. The IRS tangible property regulations FAQ covers the details.

Above $2,500, the appliance is capitalized as 5-year property. With 100 percent bonus available, the first-year result is usually similar; the difference is a depreciation schedule entry.

When you replace an appliance you have been depreciating, the remaining basis of the old one can generally be written off in the year you dispose of it. That is much easier when the old appliance was on its own line, which is another reason to separate them at purchase.

Why is Section 179 usually not the answer?

Section 179 excludes property used predominantly to furnish lodging (IRC §179(d)(1), which applies §50(b)(2)). There is an exception for lodging used mainly by transient guests, such as a hotel, so a short-term rental may be treated differently from a long-term one. That is a question for your CPA. Bonus depreciation has no lodging exclusion, which is why it is the usual route for rental appliances. Our Section 179 vs bonus depreciation guide compares the two.

Do a few appliances justify a study?

On their own, rarely. A few thousand dollars of appliances can be separated by your tax preparer. A study earns its fee when the appliances are one piece of a larger short-life allocation: carpet and floor coverings, furniture in a furnished rental, cabinetry and fixtures, and the fences, driveway and landscaping outside. The rental property depreciation calculator shows what the 27.5-year default produces, and our carpet and flooring guide covers the next most common 5-year item.

This article is general information, not tax advice. Depreciation, bonus eligibility and the passive activity rules depend on your facts; confirm your treatment with your CPA.