Asked by: Carlota Garvi
personal finance personal taxes

What depreciation method is used for rental property?

Last Updated: 2nd March, 2020

The depreciation method used for rental propertyisMACRS. There are two types of MACRS: ADS and GDS.GDSis the most common method that spreads the depreciation ofrentalproperty over its useful life, which the IRS considers to be27.5years for a residential property.

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Just so, can you depreciate your rental property?

Simply put, rental property depreciationallowsinvestors write off the structure and improvements totheproperty over a period of time. This isan“expense” that you can use as a write-offonyour taxes. However, you can onlydepreciatethe improvements to the structure itself -nottheland.

Also, how do you calculate depreciation on a rental property? The tax assessor's estimate of the land value is$75,000,and the building value estimate is $125,000.Yourdepreciation expense that you take each yearagainstrental income would be $125,000 divided by the IRSallowed27.5 years of useful life (residential real estate) foradepreciation expense each year of $4,545.

Similarly one may ask, how long do you depreciate rental property?

27.5 years

Do you have to pay back depreciation on rental property?

In fact, real estate often increases in value.Ifyou sell for more than the depreciated value oftheproperty, you'll have to pay back thetaxesthat you didn't pay over the years duetodepreciation. However, that portion of your profitgetstaxed at a rate up to 25%.

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