REAL ESTATE DEDUCTION: EXAMPLE 1
01.Core Concepts
David purchases an 8-unit rental apartment building for $900,000. The value of the land is determined to be $60,000. Since the property is used for residential rental purposes, David will be able to depreciate the building (at a value of $840,000, which equals the purchase price of $900,000 less the land value of $60,000) over a 27.5-year period. Therefore, David’s annual depreciation deduction will be $30,545.