Real Estate Depreciation Explained
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- Опубликовано: 30 окт 2019
- Real Estate Depreciation Explained // If you're investing in real estate, you've probably heard of depreciation, and how you can use it to reduce your taxable income from your real estate deals.
But how does real estate depreciation actually work? And how do new tax laws affect real estate depreciation schedules? That's what we'll cover in this video.
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Have you done a cost segregation study in the past? If so, were the tax savings worth it? Let me know in the comments - thanks for watching!
I love this! Thank you, Justin, for creating such a clear and informative video. I learned so much from it.
Your videos are super helpful. Im currently on real estate classes and Im glad I found your channel
Nice video and good info... Thank you, sir!
Words cannot explain how grateful I am in finding your channel. Thank you for sharing your knowledge and creating these easy to follow lessons. WE WANT MORE! :)
Great to hear you’re enjoying the videos, Maggy - thanks for watching!
Have you started investing yet?
Great explanation, Precise and clear, truly appreciate it.
Great content and wonderful explanation.
The depreciation recapture tex was the only reason I was looking this up and your video (first video I clicked) answered that thanks for the in depth explanation 👍
Hi Justin, I would just like to express my gratitude and thanks for the tremendous effort you put into these videos. I cannot stress how instrumental your videos have been in helping me secure internships and hopefully an analyst position this summer. Your content goes in-depth and provides vital academic and applicational commentary on hard to grasp concepts. This has led me to purchase multiple classes from your Break into CRE classes, where you provide great value for money while upholding exquisite standards in the quality of your classes especially your numerous financial modelling classes. Keep up the great work, and I will definitely be referring you to anybody interested in real estate.
Thank you, Mohamed! So glad to hear the videos and courses have been helpful. Good luck with prepping for the analyst position this summer!
What a great video! Thanks a bunch
The lighting of this video is A1
+great content
Great video! Thank you!
Great video. Would have been nice for you to go through an example on this one but otherwise very clear, concise and helpful.
Fantastic video. Love it 👌
Seriously love the content this channel gives 👌👌
Great to hear - thanks for watching!
Great subject. You never see people talk about the benefits of this. Car washes, gas stations and oil change places qualify for accelerated and/or Bonus depreciation and is a great tool for keeping more of what you make. After all it not what you make its what you keep after taxes .
Agreed, Ralph. Thanks for watching!
Thank you I’m a new subscriber 🙏
Great video
Thanks!
Nicely Explained
Thank you!
Question. Cost Segregation. Can it be beneficial for single family investor when considering cost for the study or is it just useful for commercial?
Watching this again a couple months later. Music to my ears.
Good to hear!
Q: I am building a 2-story garage that will be 50% for my business. How do I deduct this 50% and the other site-related costs to build it, ASAP. I could use the deduction on my 2021 taxes. Thanks
Thanks! I wish I knew what I were doing more. I am trying to watch tutorials and complete my taxes quickly because of the government stimulus program. We close on a house FINALLY this week and need the money. I do however own a rental. It was my first major purchase after college in 2004 and in 2007/2008 (and we listed it again several times) we could not get it sold. So, unwantedly, we have a rental lol. I unfortunately have been ill and was diagnosed finally at Cleveland Clinic in the beginning of 2018 so I have not completed my 2018 or 2019 taxes. I think I need to refile 2017 as well because I got several "corrected" tax information later into 2017. I have always been able to do them on my own but this year AND last year I was receiving treatments during filing time, so I have not felt well. I get treatments weekly for life and I feel like they are killing my brain cells. I cannot think clearly on what to put down for my rental...Can I file my 2019 before my 2018? We always get money back. Thanks so much for taking the time to read this and thanks in advance to any answers or advice. (BTW There are no tax services open where I live due to coronavirus and I don't have things as organized as I once was :-( ). Like for example I bought an AWD for towing the trailer when someone moves out and to get the rent money, etc. Is that a write off? Thanks!
Does higher mortgage payment and lower rental income count as depreciation?
Can you also do real estate depreciation for your own home?
If you buy a property and then rehab it, then what number counts as the improvement, the cost of the rehab or the new arv?
Justin Thanks for making this. I am a building contractor with a rental property and am not great with accounting. I am attempting to learn enough in order to talk to my accountant coherently. you mentiond engineers twice and I don't understand what role they take in this. I have owned my property for 20 years so from what you said a cost segregation study will not be worth it. ?
Your accountant should be able to give you a better idea of whether this would be worth it or not based on the depreciation you've taken during your 20 years of ownership. Engineers can help with determining the value of personal property vs. fixture value - your account should be able to point you in the direction of someone who can help with this, as well.
One of the best videos, helped me a lot. Also I can't keep my eyes away from the tip of your nose lol, is it only me?
What about depreciation on single family home you own and live in?
Don't you have to subtract the amount of depreciation claimed every year in total from the value of the home if you plan on selling? That's a good thing to keep in mind.
what if you sold the property at a LOSS. *(would you still have to pay depreciation recapture)? example: purchase price $100,000 improvement $200,000 depreciation of $40,000 total: $340,000 and you sold the property for $290,000 so you have a loss of $10,000. are you still subject to pay the 25% on the $40,000 depression you took? hum......would love to hear back. fromsomeone thx
How much depreciation for a commercial property that was built in 1990, the cost without land is: $650,477? Thank you
Hello, my aunt made me co-owner of her home before she passed. Now I'm the sole owner and I am renting it out. Can I still use Depreciation even though I didn't pay anything for the ownership?
So I can't use depreciation on the home I live in?
Does it have to be a rental income producing property or can you claim deoreciation on your primary residence?
Mr. Rafe, I maybe able to assist you there. Cost Depreciation only applies to investment property. Personal residence don't qualify...
Is there a limit to the length of time you need to hold the property. Say you only have it 11 months but you spent $200k
On a rehab. Can i take the bonus depreciation? Or must that
Property be income
Producing to depreciate at all?
Is there an income limit for claiming depreciation? I have a 9-to-5 job that earns me 170k a year. I recently purchased a rental house. Can I claim depreciation on it? Or does my 170k a year income prevents it?
I googled it. And in almost all articles about depreciation says “if your income is 150k or above, you cannot claim rental loss”.
This confused me. Articles are about depreciation. But when I read the part I am interested in, they switch the language to “rental loss”. Unless depreciation is considered part of rental loss, I don’t see why everyone would put that in an article about depreciation.
Say you bought a new single family house and lived there for 3 years. Later you decide to rent this house and move to a different location for job transfer. Can you apply the depreciation cost of just the rented home say worth of 200k excluding the land value using the 27.5 year calculation?
Let’s say I have two houses one I can sell early 2021 for a possible profit of 150,00. The 2nd unit I currently live in for the past year(I moved out the 1st one in 10/2019) can possibly sell for a profit of about 25 to 30,000 how would you go about these sales to pay less taxes to Uncle Sam as possible?
There are two main ways to save on taxes on the sale of real estate. If you live in the house as a primary residence for 2 out of the past 5 years, gains of up to 250k (plus 250k for your spouse) are tax free. If you don't fit this method, do a 1031 exchange. This allows you to buy another similar property with the proceeds, deferring your taxes out indefinitely until you actually pocket the gains.
Hi there , lets say my depreciation is $9000 a year but i only collected $7000 in rent , can i still deduct the full $9000 since my overall income is more than the $7000 i collected in rent ? thank you
No blogger ever think of using an example to illustrate tax principles?
If bonus depreciation applies and 100% is deducted in year 1, what happens in the following years? For example, in Year 2, are there 0 depreciation tax advantages?
Yes. Assuming a 100M purchase of assets were all eligible for bonus depreciation, in Year 1 you will have bonus depreciation = 100M and regular depreciation of 0. Your fixed asset schedule will show asset costs totaling 100M. Next to that you will show basis reductions for items like section 179 and section 168 (which is Bonus). This column will total 100M. The next column will show net depreciable basis. In this example, you'll have no depreciable basis because Cost less Basis Reductions = 0. So 0 depreciable basis times each annual depreciation factor is always 0 so depreciation in years 1 until the end of its useful life as determined in the internal revenue code, annual depreciation will be 0.
What this video doesn't get into is the state side. Many states don't follow bonus depreciation, so you'll need to maintain another schedule for your fixed assets as if no bonus was taken. Same rules apply in coming up with depreciable basis, however you consult with your states revenue code to determine what basis reductions are allowable. Most states follow the depreciation factor tables the IRS does, so generally the useful life and depreciation factor for federal purposes on a particular asset is the same for a state. The difference to keep in mind is that the DEPRECIABLE BASIS may be different for federal and state purposes. Typically the difference is caused by bonus depreciation.
Can you please make videos about penthouses and apartments?
Thanks for the informative video. One question, if say you spend 60K on renovating a rental property you just purchased and add the $60K to depreciation, will the property tax go up because you added $60k to the rental house?
Yes, the property tax should go up as the value of the property has increased. With that, it is possible that not all of the 60k of renovations is immediately depreciable under the bonus rules. If you’re making improvements to the exterior of the rental property (roof, garage door), then that would still depreciate over 39 years whereas the other improvements could be taken as 100% bonus depreciation.
Appliances? Fences? Carpet?
Hello. Can you please answer a question for me? Here goes: Which of the following may not be depreciated? 1. Vacant Land 2. Anything owner occupied 3. An office building held for investment or income 4. Neither vacant land nor owner occupied properties can be depreciated.
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Handsome
I will find a way to depreciate land mark my words.
geez this guy is hot.
A little too much jargon.
✌&❤
😂😂😂 STOP LYING......Land can DEPRECIATE. 🤭👑