Is Depreciation on Rental Properties Tax Deductible?

When you rent your property to a tenant, it is important to include that specific rent as income on your taxes. Rental property tax deductions may cause several confusions. Many of the times, rental property is costly to maintain, especially when there are gaps between tenants. You may remove or subtract your rental expenditures. If your interest payments and expenditures on rental properties are higher than income generated, you may claim that loss. Several expenses are deductible in the year you may spend money. However, when it comes to depreciation, it is a different scenario altogether. A rental property tax deduction may emerge as a good method to increase your tax refund.

Given below are important factors that you must consider:


It is important to understand the definition of depreciation. When it comes to rental property, depreciation can be defined as assigning the property cost and not value assessment. You need to depreciate rental property even if it stays in a good shape. You may seek the help of experts for calculating property depreciation tax deduction.

What is Depreciable Property?

In order to seek a deduction for depreciation on a rental property, the property must full certain conditions:

  • You should own the property instead of renting or borrowing it from someone else.
  • It is important for you to use the property so that it generates income by way of renting it.
  • You should be able to define the useful life for the property.
  • It implies the property should be the one that would ultimately depreciate or depleted. It will help you asses your estimate tax returns. It is interesting to note that a home has a determinable useful life but a piece of land does not.
  • The useful life of a property is longer than a year. In case property gets depleted or depreciated in a year, you may have to subtract the whole cost as a regular rental expenditure.

Depreciating Improvements

Money spent on the improvement of a property will also be depreciated. An improvement helps in boosting the value of a property. It also helps in restoring the property to its mint new condition. Some of the common improvements may include building garages, replacing roofs, adding wall to wall carpeting, installing AC or heating system. However, some routine repairs and maintenance costs will be included under the category of improvements. Meanwhile, maintenance expenses will be subtracted as expenditures in the year you spend the money. And, replacement of the whole roof will be eligible for depreciation.


You can begin taking depreciation deductions when you start using the property for generating rental income. We cannot rule out the significance of property investment returns. IRS has explained it as and when you put your property in service. And, depreciation will continue until one of the two scenarios takes place. The first one is when you have subtracted your whole cost basis in the property. In many cases, your cost basis will be what it may cost you to purchase the property. It may also include some fees and taxes paid at settlement along with any improvement undertaken to the property. And, the second one is when you eliminate the property from service. It implies you cease to use the property for generating income. It may be because you decide to sell the property or just stopped renting it.