Depreciation of a House

Depreciating a house lowers its value.

Depreciation a house is an important business practice because it helps you lower fiscal liabilities in the short and long terms. Internal Revenue Service (IRS) rules only allow depreciation of rental property.

Depreciation Defined

Depreciation means spreading the cost of an asset over several years. An asset is an economic resource you own and use in business activities. A rental house is a long-term asset because you most likely will operate it for more than a year.

House Depreciation

You depreciate a rental house to recover the cost of the property of a defined number of years. The IRS allows you to depreciate over 27.5 years a house you operate for rental income. You will report depreciation expense in the statement of profit and loss.

Other Considerations

The IRS allows taxpayers to depreciate non-residential property over 39 years. For example, if you own a house that corporate clients periodically rent for seminars or working sessions, the property may be considered non-residential, in which you depreciate it over 39 years.

References

• Advantage Software LLC: Depreciation - Depreciation Real Estate
• Investopedia: Depreciation
• Internal Revenue Service: Overview of Depreciation