How to Depreciate Your Rental Property

While most investors know they can deduct yearly expenses from rental income for tax purposes, including gardening, maintenance, and even fees for property management in San Francisco, some improvements last longer than a year. For this reason, you need to depreciate the cost for the maximum benefits.

Replacement Depreciation

For replacements and projects that will last longer than 12 months, divide the cost by the estimated years of use. For example, a new driveway lasts about 15 years; if the driveway costs $10,000, divide $10,000 by 15. In this case, it would be a $667 depreciation every year. Ask your property management team in San Francisco for their records of work done over the last year before tax time so you can get a head start crunching the numbers.

Rental Property Depreciation

You can also depreciate the building after you own it for a year. Separate the purchase price of the property between the land and the building and then divide the total cost of the building by the useful life, which is 27.5 years according to the IRS. Therefore, if the building is assessed at a value of $500,000, the depreciation is $18,181 per year.

Our Property Management team in San Francisco can help you get the most return on your rental investment.Contact us today to learn more!