Deducting an asset’s cost over its useful life instead of all at once.
For landlords it is the star tax break: residential buildings depreciate over 27.5 years, sheltering rental income from tax without costing cash. The IRS claws some back at sale (recapture).
Formula: Annual = (Cost − Land) ÷ 27.5 (residential)
Example: A $280,000 building ÷ 27.5 = $10,182/year deduction.
FAQ
What is Depreciation in simple terms?
For landlords it is the star tax break: residential buildings depreciate over 27.5 years, sheltering rental income from tax without costing cash. The IRS claws some back at sale (recapture).
How is it calculated?
Annual = (Cost − Land) ÷ 27.5 (residential). Example: A $280,000 building ÷ 27.5 = $10,182/year deduction.