Understanding Depreciation of Rental Property: A Comprehensive Guide
Key Takeaways
- Property owners use depreciation to deduct certain costs of a rental property over its useful life.
- Eligibility for depreciation requires the property to be owned, used for income, and have a determinable useful life.
- The modified accelerated cost recovery system (MACRS) is commonly used to depreciate residential rental properties.
- Calculating depreciation involves determining the property’s basis and applying the right method.
- Depreciation must be reported to the Internal Revenue Service (IRS) on Schedule E.
For rental property owners, depreciation is an important consideration for maximizing tax benefits and maintaining compliance with Internal Revenue Service (IRS) regulations. This tax deduction allows property…
