Depreciation (Real Estate)
Tax and finance · Reinvent NY glossary
Depreciation is a tax deduction that allows real estate investors to recover the cost of an investment property over time — 27.5 years for residential and 39 years for commercial properties. Only the building value (not land) is depreciable. For a $500,000 residential rental property with $400,000 building value, the annual depreciation deduction is approximately $14,545. This 'phantom expense' reduces taxable rental income without any actual cash outlay. When selling, depreciation recapture is taxed at 25%. Cost segregation studies can accelerate depreciation, yielding larger deductions in early years.
Related Terms
Related Articles
- →109 East 79th Street: A Steven Harris Condominium
109 East 79th Street, between Park and Lexington Avenues: a limestone and brick condominium by Steven Harris Architects, and what buying there involves.
- →70 Vestry: Robert A.M. Stern's Tribeca Waterfront Condo
70 Vestry, 70 Vestry Street in Tribeca: Robert A.M. Stern's 14-storey limestone condominium facing Hudson River Park, and what buying there involves.
- →760 Madison Avenue: The Giorgio Armani Residences
760 Madison Avenue, The Giorgio Armani Residences: ten condominiums above the Armani flagship at East 65th Street, and what buying one from abroad involves.
- →200 East 83rd Street: Robert A.M. Stern on Third Avenue
200 East 83rd Street, at Third Avenue on the Upper East Side: a 35-storey Robert A.M. Stern condominium of 86 residences, and what overseas buyers should check.
Keep reading
Want the tax side checked before you sign?
Talk to us about it