How to Depreciate Rental Property

When you own a rental property it is integral that you know the value of the property. You might think that higher property values are beneficial, but many landlords can get access to tax breaks by learning how to depreciate rental property effectively. This means that some of your earnings as a property owner can be deducted for tax purposes. When you have more than one property, it is essential that you learn the tips and tricks behind property deprecation. The best way to deduct rental income is by depreciating the property.

What Portion?

When it comes to deprecating your property, tax laws put mandates on what portions of the property can be depreciated. In order to actually deprecate the property, you must be the actual property owner. This means that tenants or property renters do not have the authority to depreciate a rental property. Only the landlord or owner has this ability. Another important thing to remember in regards to depreciating rental property is that land can’t be deprecated. Only the physical structure can be deprecated.

Do Dates Matter?

Dates are very important for proper depreciation of rental property. This means that you must do your research and identify the date that the property was placed in service. A rental property can’t be deprecated until it is rentable. However, even vacant properties can be deprecated as long as they are available for service. This usually only matters when a property is newly purchased and all other rental properties are serviced starting in January.

What Costs Matter?

When you are deprecating the rental property, you have to take into consideration a variety of expenses and costs. This includes all repairs and improvements made to the structure, all legal fees for zoning and also subtracting the cost or value of the land. It is also important that you do your research on how long a property can be depreciated. Most rental properties can be deprecated for up to 27.5 years.

Do the Math

To get the amount of depreciation on the property for the year, you must do the math. This means that you divide the amount of months the property was serviced by 12. This number that you obtain is the depreciation amount for your rental property.

You can use the depreciation of your rental property to your advantage when filing your taxes as a property owner.
Posted on Aug 14, 2014


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