What is Depreciation?
Depreciation is a tax deduction that lets real estate investors write off the cost of an income property’s building (not the land) over time, even as the property may rise in value. It reduces taxable rental income during ownership. Some of it may be “recaptured” and taxed when you sell, so plan with a tax professional.
Example: An investor deducts a portion of their rental building’s value each year as depreciation, lowering the taxable income from the rent they collect.