Calculate straight-line depreciation and annual tax savings for your commercial property investment.
Straight-line depreciation and tax savings
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The IRS lets you deduct building cost over 39 years (commercial) or 27.5 years (residential rental). This paper loss offsets income, reducing taxes even while the property appreciates. Land is never depreciable.
A cost segregation study reclassifies components into 5, 7, or 15-year categories. This front-loads deductions and can save tens of thousands in early-year taxes. Especially powerful with bonus depreciation.
At sale, cumulative depreciation is recaptured at 25% federal rate. $300K depreciation = up to $75K recapture tax. Can be deferred with a 1031 exchange.
Depreciation creates tax losses even with positive cash flow. $80K cash flow minus $40K depreciation = only $40K taxable. This deferral is one of CRE's most powerful wealth-building tools.
Common depreciation questions.
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