INVESTMENT SERIES​_ Depreciation & Deduction

C Land Mini Seminar

INVESTMENT SERIES​

Depreciation ​

Presented Stephen Lee/Jane Choi with CRI

Depreciation & Deduction

Definition of Depreciation : ​

Loss of value brought about by physical deterioration or ​

Functional or Economic/External obsolescence.​

​Types of depreciation ​

1) Physical Deterioration ​

2) Functional Obsolescence​

3) Economic/External Obsolescence

Tax Deduction on Depreciation​

• Depreciation periods ​

          – Residential Investment Property – 27.5 years​

         – Commercial Investment Property – 39 years​

           * Note: Land is not depreciable.​
                         Straight-line method

Notes: ​

1. Investment property only​
2. Land is not depreciable.​
3. Straight-line method​
4. Cost segregation studies​
   – Reclassify items like appliances, carpeting, and land improvement for shorter depreciation like 5, 7, or 15 years.​
   – Certain/special facilities for commercial properties

Notes: ​

5. Bonus depreciation
   – Some land improvement, for example, sprinkler system, fence, landscaping, can be considered as bonus depreciation that 100% cost can be deducted at the first year of service. ​

– For the sale of business opportunity, a bonus depreciation allowed 20% on new or used personal property used in the business in the first year

     6. Depreciation recapture

 – When you sell a depreciated property, IRS may recapture depreciated value.

Value appreciation and depreciation ​

​Principle of conformity ​
      – Principle of regression ​
      – Principle of progression ​

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