We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is Rental Depreciation?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 5,667
Share

Rental depreciation is the change in value of rental properties within a specified period of time. A number of factors can impact the rate of depreciation, with the gradual deterioration of any buildings on the property being one of the most important. Other factors such as changes in the area where the property is located, shifts in consumer demand for the property, and the state of the general economy can also impact the rate of rental depreciation.

It is important to note that the incidence of rental depreciation does not necessarily mean that the owner is failing to maintain the property. Often, the changes in market value are due to factors beyond the control of the owner. For example, if the neighborhood where the property is located should decline significantly, the value of that property will decrease even if the owner has maintained it in pristine condition.

Understanding rental depreciation is important for purposes of paying taxes and claiming any tax breaks that may be offered as the result of the decrease in property values. Many nations provide some amount of annual depreciation on rental properties based on the age of the structures on the real estate. This means that an office building may be allowed a certain amount of depreciation each tax year, even when the building remains in proper working order and is fully occupied. While this depreciation may be offset by increases in the market value of the property, owners can still utilize this age depreciation as a means of offsetting some of those gains and keeping the taxes owed as low as possible.

In many nations, rental depreciation is only applicable when the owner does not actually live on the premises. This means that an individual who operates a boarding house or other facility that included living quarters for the owner may or may not be able to claim this type of depreciation. One important clue as to whether or not the owner can claim depreciation on the rental property is found in the applicable tax laws. Should the text of those laws note that the tax breaks are only available when the owner does not reside on the property, it is necessary to look for other types of exemptions that may be applicable.

Another important point to consider is that tax laws in some nations draw a distinction between the value of buildings on property and the overall value of the property including the buildings. When this is the case, it is necessary to segregate the value of the structures from the value of the land on which the structures are found. In this scenario, the owner can only claim rental depreciation on the value of the buildings, and must exclude any depreciation that may affect the value of the land. Tax experts can help owners determine the most appropriate way to calculate rental depreciation according to current tax regulations and avoid making claims that are ultimately refused by local and national tax agencies.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-rental-depreciation.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.