Depreciation
A tax deduction for the gradual wear of your rental property — 27.5 years for residential.
Depreciation is the most powerful tax advantage in real estate. The IRS lets you deduct the cost of your rental building (not land) over 27.5 years, even though the property is probably appreciating in reality. This phantom expense reduces your taxable rental income without costing you any actual cash. A $200K building generates $7,272/year in depreciation deductions.
Annual Depreciation = (Building Value) / 27.5 Building Value = Purchase Price - Land Value (typically 20-30% of purchase is land)
Track depreciation in the Tax Center. Kaison helps you calculate the building vs land allocation and annual depreciation amount per property.
Depreciation can create paper losses that offset other income — even your W-2 if you qualify as a Real Estate Professional (750+ hours/year). This is how serious investors pay very little in taxes.
Cost Segregation Study
An engineering study that reclassifies building components for faster depreciation.
Bonus Depreciation
First-year additional depreciation on qualifying assets — phasing down annually.
Depreciation Recapture
When you sell, the IRS taxes back the depreciation you claimed — at 25%.
Educational content only. Consult a CPA or attorney for advice specific to your situation.