Definition
Building depreciation is a ~3.6% annual deduction on building value over 27.5 years. It creates paper loss often exceeding actual expenses—powerful tax planning tool.
Where you’ll meet it
How do I take care of a home I'm not in?
See it in Buying a second home · Step 6About this term
Building depreciation is 27.5-year deduction worth ~3.6% of building value annually. Depreciation creates paper loss often exceeding actual expenses. Depreciation is later recaptured on sale (25% tax). Depreciation is powerful tax planning tool.
Pro Tip
Leverage depreciation for tax planning. Combined with other deductions, it often creates tax-sheltered income.
Example
$200,000 building depreciates $7,273 annually, creating tax deduction despite positive cash flow