Rental Property Depreciation

[Gaara]

s About Taxes)/Rental Property Depreciation Advertisement Expert: John Stancil, CPA - 2/12/2004 My mother owns a an income producing rental property & I had just started inquiring about claiming depreciation on the rental, but am confused how to compute it and/or even it is worth using.  I read Publication 17 on it, but it does not explain it very well.  Could you please help me in two ways;  is depreciation worth computing? & if it is, how do you compute the depreciation for the property?  

[Sefton]

Mike,

Thanks for your question.

Yes, depreciation is very much worth computing, for two reasons.  First, it will result in a significant decrease in your taxes.  Second, if and when you sell the property, the government requires that you reduce your basis in the property by depreciation that is allowable.  So even if your don't take the depreciation deduciton, your basis in the property will be reduced by the amount of depreciation you could have taken. You don't state what the property is, but I assume it is residential real estate.  This is depreciated over a 27.5 year period using the MACRS depreciation method.  IRS Publication 527 has a table showing the percentage that is allowed each year.

If she has filed in the past and not claimed the depreciation, she should file amended returns, claiming the deduction.  You can file an amended return for 3 years after the due date or filing date whichever is later.  That means you can still amend your 2000 return until 4/15 of this year.

Hope this helps.

John Stancil, CPA