A comprehensive guide to rental property depreciation

Putting money in the rental property is one of the smartest investment ideas for real estate investors. A major benefit of investing in rental property is that it ensures a constant income from the property you have bought. In addition to the rent you get, you can also use rental property depreciation to draw benefits in the tax calculations. You can include several deductibles such as maintenance and repair, management expenses, mortgage insurance, property taxes, and many more. However, to avail of the maximum benefits, you need to understand who rental property depreciation works. You can also hire professional quantity surveyor services that can guide you through the process and ensure an accurate valuation of the property. They make sure that you save the maximum on taxes and maximize the deductions on the purchase and improvement cost of the concerned property.


  • Understanding property depreciation


If you invest in a rental property, you can claim the depreciation of the building as well as the content it has, against your taxable income. To understand it better, let us break the depreciation that you are entitled to claim into two parts. The first part includes the depreciation on the building. It refers to the construction and includes the cost of material like concrete, timber, etc. The other allowance is related to the content of the building. You can claim depreciation of the fixtures and fittings such as window blinds, ovens, carpets, etc. All these costs can be deducted against your taxable income.


  • Understanding rental property depreciation schedule


To avail the benefits of rental property depreciation, you need to present the taxation department with a property depreciation schedule. The schedule details about the costs you want to take benefits from for tax computation. These costs and tax are generally computed quarterly and the schedule contains details of deductions for every quarter. The best time to get the schedule prepared is right after the property settlement and before you let your tenant move in the building to minimize disruption.


  • Benefits of rental property depreciation schedule and how to get it prepared


Rental property depreciation schedules must be prepared by a professional quantity surveyor instead of your accountant. This is because depreciation schedule preparation needs computation of construction cost and evaluation of property depreciation. An accountant is an expert in taxation but has not much knowledge in these fields. A quantity surveyor can give you accurate figures and maximize your savings. Rental property depreciation is a non-cash deduction from your taxable income, meaning, you need not pay anything to claim it. It is simply deducted from your income and helps you save tax.


  • Finding eligibility of your property for depreciation claims


Another concern that often troubles the real estate investors is knowing whether their property is eligible for property depreciation claims or not. Well! The answer is straightforward. The following are the eligibility criteria for depreciation claims.

  • Income-producing buildings: All buildings that are earning revenue for you are eligible for claiming depreciation deductions. However, there is a timeline restriction on the type of depreciation you can claim. Generally, states allow buildings constructed after a certain year to claim for both construction and its content. Buildings constructed before the specified year can claim only on the content. This timeline restriction can be different for residential and industrial buildings.
  • Renovated buildings: You can also claim depreciation deductions for a renovated building. You only have to show the renovation cost in detail.