Depreciation is a crucial aspect of owning rental property. It allows you to deduct the cost of acquiring and improving the property over time. But how long can you actually depreciate it for? Let’s dive into the details.
How long do you depreciate rental property?
The answer to this question depends on the type of rental property and certain factors like its useful life. Generally, residential rental properties are depreciated over 27.5 years, while commercial properties have a depreciation period of 39 years. The Internal Revenue Service (IRS) allows property owners to take this non-cash deduction annually, helping to offset the income generated by the rental property.
FAQs:
1. Can I claim depreciation on the land I own along with rental property?
No, land is not eligible for depreciation as it is considered to have an indefinite life.
2. What happens when the useful life of a rental property ends?
Once the useful life of a rental property has ended, it is no longer depreciated. However, by that time, you may have experienced significant wear and tear on the property, making it a suitable time for potential renovations or upgrades.
3. Can I accelerate the depreciation of rental property?
Yes, there are methods like cost segregation that allow you to accelerate depreciation by segregating assets with shorter useful lives, such as appliances or certain components of the building.
4. What if I sell my rental property before the depreciation period ends?
If you sell your rental property before the depreciation period ends, you may need to recapture a portion of the depreciation you claimed as income. Consult with a tax professional to understand the implications specific to your situation.
5. Can I continue depreciating my rental property if it is not generating income?
No, you can only depreciate a rental property that is generating income. If there is no rental income, you cannot claim depreciation deductions.
6. Is there any time when depreciation stops temporarily?
Yes, if a rental property is not available for rent, such as during periods of extensive repairs or renovations, you may be able to temporarily suspend depreciation deductions.
7. What if I switch the use of my rental property to personal use?
If you convert your rental property to personal use, the depreciation deductions must be recaptured and reported as income.
8. Can I still depreciate rental property if I inherited it?
Yes, the depreciation schedule for rental property starts fresh when you inherit it, based on the fair market value at the time of inheritance.
9. Is it possible to amend previously claimed depreciation deductions?
Yes, if you made a mistake or need to modify previously claimed depreciation deductions, you can do so by filing an amended tax return.
10. Can depreciation be claimed on the purchase of rental property using a mortgage?
Yes, both the value of the property and the financing costs can be depreciated. However, land and loan payments are excluded.
11. Can I claim depreciation on equipment or furniture in my rental property?
Yes, equipment and furniture used for the production of rental income can typically be depreciated over shorter periods, usually between 5 and 7 years.
12. Can I take depreciation deduction if I use my property partially for personal use?
Yes, if you use your rental property partially for personal use, you can still claim depreciation, but only on the portion of the property that is rented out.
In conclusion, the duration for which you can depreciate rental property varies depending on the type of property. Residential rentals have a depreciation period of 27.5 years, while commercial rentals have a period of 39 years. It’s important to consult with a tax professional for personalized advice and to ensure you accurately claim depreciation deductions according to IRS guidelines.