Rental property depreciation is the one deduction the IRS counts against you whether you take it or not. Here's how yours is calculated, line by line.
In this solo episode of The Tax Strategy Playbook, David Wiener, Mr. Cash Flow, walks through real estate depreciation from the beginning. You'll see what goes into your cost basis and what stays out, how to split land from building using your county assessor's ratio instead of a flat 20 percent guess, why the clock starts on the placed in service date (the day the property is ready and available for rent) instead of the closing date, and how the mid-month convention shapes your first year. If you've ever searched how to calculate depreciation on rental property, the duplex example in this episode is the whole answer.
Then David takes apart the advice to skip depreciation so you won't owe tax when you sell. The IRS lowers your basis by the depreciation allowed or allowable, whichever is greater, so the deduction you skipped still counts against you at the sale. Of all your rental property tax deductions, depreciation is the one that never costs you a check, and it still matters on a rental that shows a loss.
Built for the investor with one to five rentals who has never looked at the depreciation line on their own return, the business owner who owns or is buying a rental or the building their company runs out of, and the tax professional who wants a plain English version to hand a client. It also covers converted homes, inherited rentals, short-term rentals (where 27.5 versus 39 years is a judgment call your tax professional makes), and when an engineering-based cost segregation study, with an in-person site visit, moves parts of the building onto 5, 7, and 15 year schedules. Every dollar figure in the episode is an illustration, not a client.
CHAPTERS
00:00 What is rental property depreciation? 27.5 vs 39 years explained
05:40 How to find your cost basis and split land from building
10:25 When does depreciation start on a rental? Placed in service and the mid-month convention
13:28 How to calculate depreciation on rental property: a duplex example
18:00 Repairs vs improvements: de minimis safe harbor and the old roof problem
22:37 Do you have to depreciate rental property? Allowed or allowable and passive losses
25:56 Depreciation on a converted home, inherited rental, short-term rental, or business building
29:25 Cost segregation and 100% bonus depreciation on a rental property
34:18 Rental property depreciation FAQ
37:51 Your rental property depreciation playbook: five steps this week
Nothing in this episode is tax advice for your situation. Your numbers are your numbers and they need a professional who knows them. Tax evasion is a crime, but tax avoidance is mandatory.
Your host: David Wiener, "Mr. Cash Flow"
https://davidhwiener.com
mailto:David.wiener@cashflowstrategies.us
770-224-8504x2
Schedule a conversation or free consultation at
https://calendly.com/david-wiener/initial-consultation
Subscribe to The Tax Strategy Playbook Podcast Channel:
https://www.youtube.com/@TaxStrategyPlaybookPodcast/?sub_confirmation=1
Get updates, special episodes and live streams, and free resources on the latest tax strategies:
https://www.taxstrategyplaybook.com/newsletter/
#RentalPropertyDepreciation #RealEstateDepreciation #RentalPropertyTaxDeductions #CostSegregation #TaxStrategyPlaybook