What is Property Depreciation?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 30 August 2019
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Property depreciation is a kind of financial measurement that businesses and individuals use to be able to deduct some property related costs from their tax burden. Property depreciation measures the obsolescence or other loss in value of a property over time. To calculate property depreciation, property owners need to know the original cost of acquiring the property, and understand the costs and benefit involved in using it for business.

Generally, property depreciation affects each annual tax filing for an individual or business that uses a n acquired property for carrying out business operations. Properties that are bought for personal use cannot legally be depreciated. That includes homes and other properties that are not used for business.

It’s important to understand that property owners cannot depreciate land. Property depreciation only affects structural properties that can decrease in value over time because of physical wear, decay or other similar factors. Rental properties and properties used for storing goods are common kinds of properties that business or individual tax filers seek to depreciate.

Accountants commonly used a system called MACRS or Modified Accelerated Cost Recovery System to depreciate a property. This analytic method helps to define the depreciation or loss of value. Some property owners will look at different methods of depreciation, including straight line or accelerated methods, to see if they can get more depreciation in the first year or initial years of their business use for the property.


When an individual self-employed business person or a small business acquires a property, the leadership needs to understand how property depreciation will benefit their bottom line. Lots of these individuals use specialized and certified tax preparers to educate them on how they can save money from good property depreciation methods. These tax specialists will also help business people to depreciate other assets, such as vehicles or large pieces of equipment.

Depreciation is a major part of calculating business loss or gain for the tax filing of a specific business operation. It’s also a calculation that is based on some complicated criteria, since the amount of depreciation that is involved may not be evident to the property owner. Property depreciation is only one of the issues that drive all sizes of businesses to invest in the services of professional and qualified tax preparation assistance in order to save the most money while still filing a beneficial, but precisely legal annual tax return.



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