Depreciation For Rental Properties

Depreciation is used for items that cannont be fully expensed in the year they were paid for.  For a rental property this would include items such as the building, appliances, furniture, and improvements. 

Property that should be depreciated meets the following requirements:

  1. You own the property
  2. You use the property in your rental
  3. The property has a dterminable useful life
  4. The property is expected to last more than 1 year
  5. The property is not excepted property (such as property placed in service and disposed of in the same year)

For rentals, the following are examples of depreciable property and their useful lives:

  • Building – 27.5 years
  • Appliances – 5 years
  • Carpets – 5 years
  • Furniture – 7 years
  • Fences – 15 years
  • Additions and improvements – 27.5 years

When you start to rent a residential home, part of the cost basis of the home must be allocated to land.  Land is not a depreciable item.  You can figure the portion of the building cost attributable to land by using proprety tax records or a professional appraisal.

If questions arise about whether or not a rental item should be expenses or depreciated for tax purposes it is always best to consult a tax professional.  This way you can make sure your tax return is correct.


About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. Since 2002, he has owned his own small business, Huddleston Tax CPAs. He is a graduate of Washington State University and the University of Washington School of Law.