Rental investment property depreciation works as follows:
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!... more