Property Depreciation 101

Depreciation Bar Chart

Property Depreciation 101

April 11, 2019

Depreciation is normally noted for being a negative term, however there are many tax benefits for this otherwise annoying word.

In fact, if you own an investment property or a home which functions as a business, this asset qualifies for depreciation as long as it is not your own personal primary residence. Here are a couple of mandatory qualifiers for such depreciation: you must have owned the property for a minimum of one year, the property endure wear and tear on an ongoing basis and you own the property. Most real estate investments fit this criteria.

If you have purchased a property for the purpose of accumulating rental income, you may start officially depreciating said property the day you obtain the deed. You do not need to wait until qualified tenants move in and are officially occupying the space.

Properties may be depreciated for 27.5 years. For every year that you own the property, it qualifies for a 3.636% depreciation value. If your property was purchase in the middle of the year, you can only depreciate it by using a schedule during that first calendar year of ownership. Check out the a depreciation schedule here.

Be sure to note that land cannot be depreciated. Only the structure(s) on the land may be depreciated. If you have decided to occupy a property yourself, it may no longer be depreciated as it is now your primary residence. If you have already depreciated a property for 27.5 years, you may no longer continue to depreciate it.

Related: "3 Common Landlord Tax Questions"

For more information, contact Innovative Property Solutions today!

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