How to Depreciate a Rental for Taxes
You can show a rental property as a depreciation to get tax deductions. Generally rental property is a good way of investment and its major benefit is that you can sometimes get tax deductions. However, the benefit is limited to rental properties for housing only, and you may not be able to get the same amount of tax deductions for other properties. Make sure you have a proper estimate of your properties before making a claim for tax deductions.
Instructions
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1
Eligibility
Not all properties are eligible for depreciation. So determine type property before you claim for tax deductions. Make sure you own the property for an income purpose for more than one year. Only then you are eligible for tax deductions on it. Since the original owner of the property is eligible for tax deductions, sub-rented properties cannot qualify for the deductions. -
2
Useful Life
You should also find useful life of the property. For this, search the website of the IRS. Generally a rate of about 27.5 per cent applied for the spread period of useful life on the rental property. Measure the years of the property and then spread the rental income over the period. -
3
Depreciation Expense
You should also know the depreciation expense of the property. For this you can compute the depreciation purchase price of property with the useful life. -
4
Reduce Earnings
To apply and get deductions, you can deduct the depreciation expense from the earnings. When depreciation rate is computed to useful life and deducted from the revenues, it reduces the amount of tax that is deducted from your revenues. -
5
Do Proper Calculations
Since it is a bit tricky business, make sure you search the matter thoroughly and study relevant rules of seeking tax deductions on rentals. This is only meant for the housing properties, and if you are not sure about the eligibility of it, you may seek professional advice. You must understand the basic principles of how the system works before claiming a deductions. You should be owner of the properties, as you cannot be qualified for deductions on a sub-contract rentals.
