Depreciation: #3 Benefit When Investing In Kansas City Real Estate

Did you know that the IRS allows you to depreciate your real estate holdings? Of course you did.

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!

3 Comments

Filed under 4 Benefits of Real Estate Investing

3 responses to “Depreciation: #3 Benefit When Investing In Kansas City Real Estate

  1. Benjamin Williams

    Almost entirely correct. Lighting fixtures are generally not depreciable over 5-years. Specialty and decorative lighting fixtures, that illuminate non-building areas such as a spotlight on artwork, are depreciable over 5-years.

    You forgot the biggest bang for the cost segregation buck. The electrical wiring and the portion of the property’s electrical system that is dedicated to powering personal property is also 5-year property. Often, this amount is larger than the carpet, appliances, and other personal property put together! You need an engineer or other technical person, not just an accountant or tax planner, to figure this one out though.

  2. Chris Lengquist

    Benjamin – Thanks for commenting. Readers, to find out more about Benjamin follow his link.

    Thank you for clearing up my confusion. But it again highlights the fact that you need a very knowledgeable person to help you break these out for tax purposes. While I have a very good understanding of the process, you do not want me actually doing your taxes. Heck, I don’t even do mine!

  3. Pingback: Again With The Four Benefits of Real Estate Investing « Kansas City Investment Property

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