Archived in the category: Real Estate Terms & Definitions
Posted by admin on 27 Mar 12 - 1 Comment

Depreciation (or sometimes called cost recovery) is the amount of the tax deductions that an investor can take each year from the depreciable asset, until this asset is fully written off. In Real Estate only the building part (not the land underneath it) can be counted for depreciation. The property can be depreciated over its useful life. The useful life is specified by the tax laws and usually is not the same as the expected actual physical life of the property. According to the current tax laws, residential properties are depreciated over 27.5 years in the USA and nonresidential (commercial) over 39 years. Closing costs and capital improvements are both depreciable in a similar way.

One comment for “Depreciation”


Actually it is preferable and more profitable, in most all cases, for the owner of a CRE owner to more rapidly depreciate their property by using an IRA approved tax strategy known as “Cost Segregation”. That is accomplished by identifying, valuing and specifying non-structural and “personal property” components of the building and land improvements. Typically about 15% to perhaps 40% of a property qualifies for accelerated depreciation.

August 16th, 2016 at 10:41 pm

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