You can deduct a "paper loss" in value of the rental property, regardless of the actual change in value. The loss is calculated based on a 27.5 year value life span of the property, so divide the purchase price by 27.5, and that's your theoretical depreciation for a year.
That's my understanding as a landlord, but I'm not an accountant, so be sure and double check that with your accountant or with a friend in the industry, if you have one.
Happy tax deducting!
cost basis(if not involved in a 1031 exchange): Net price paid(purchase price - costs of purchase) - depreciation from the month of purchase to current month.
Each year u should take the depreciation expense every year.
IRS will assume thyat u took that expense whether u toolk it or not.
So u end up paying capital gains on depreciation u purportedly took.
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