What is Rental Property Depreciation?
Depreciation is a non-cash tax deduction that lets you write off the cost of your rental building over 27.5 years. This reduces your taxable rental income without spending any actual money. It is one of the biggest tax advantages of real estate investing.
Formula
Annual Depreciation = Building Value / 27.5 years
Good
Reduces taxable income by thousands per year
Great
Cost segregation study can accelerate depreciation significantly in year one
Watch For
Depreciation recapture tax applies when you sell unless you do a 1031 exchange
Frequently Asked Questions
What is a good Depreciation for rental property?
A good Depreciation is Reduces taxable income by thousands per year. A great Depreciation is Cost segregation study can accelerate depreciation significantly in year one. Be cautious if Depreciation recapture tax applies when you sell unless you do a 1031 exchange.
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