Definition
A document detailing the annual depreciation deduction for a rental property and its components, used for tax reporting purposes.
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Rental properties depreciate over 27.5 years for residential property. The depreciation schedule breaks down the property value into depreciable components (structure, appliances, fixtures) and non-depreciable items (land). Investors must calculate annual depreciation deductions using Form 4562. Depreciation reduces taxable income and must be recaptured when the property is sold.
Pro Tip
Work with a tax professional to calculate depreciation schedules using cost segregation for maximum deductions.
Example
A rental property with a $300,000 depreciable basis depreciates $10,909 annually over 27.5 years, reducing taxable income by that amount.