Quick. How long does it take?
Right. Twenty-seven and a half years (well, that’s not exactly accurate but we’re talking about our government setting this up, right?).
Also, wrong. Did you know you could break out your depreciation? Sure, the building has to be depreciated over 27.5 years. But what about your personal property within the house? i.e. carpeting, lighting fixtures, appliances, etc. Five (5) years! At a much higher percentage.
And land improvements can be depreciated over the course of only 15 years. What are land improvements? Landscaping, sidewalks, stairs, driveways, etc.
All this is called Cost Segregation. And it’s too complex for me to explain all the benefits of accelerating your depreciation here. Feel free to do some research on the web or ask your tax planner about it. But sadly, it’s over the heads or beyond the knowledge of many tax “specialists” as well.
Make sure that if you choose to take advantage of Cost Segregation for your rental income properties that you have a tax preparer that understands what Cost Segregation is!