Profile picture for duds4

How do I calculate what I will have to pay in depreciation for an investment property?

  • May 20 2010 - Town of Ipswich
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (1)

Profile picture for shasta_steve

You don't actually pay depreciation.  It is a tax deduction you get for the expected life of a property or item.  For a rental house it is 27.5 years.  You figure depreciation by determining the value of the house but not the land.  It is not determined until you actually place the property in service.   You can use property tax or an apprasial to determine what the value of the property is. 

Now what happens is the adjusted basis of the property is lowered everytime you take depreciation.  So if you buy a house for 120k, but the value of the land is 20k, you would take depreciation on 100k at about $3,600 a year.  If you hold the property for 5 years you would lower your adjusted basis a little over $18,000.  If you sold the property for 150k you would owe capital gains on $48,000 30k in apreciation and 18k depreciation. 

Really it is a lot more complicated than that and different forms of property have different depreciation.   I would highly recomend you have a tax professional do your taxes, at least the first year.  I did my own taxes this year and had lots to learn.  I would have saved myself lots of time and grief if I had just paid someone this year and then next year it would have been easy. 

  • May 20 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.