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Getting Smart about Tax Depreciation

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It is vital to claim depreciation as it is one of the most important tax benefits that you can avail. However, several property owners are not aware of this benefit. You should never overlook depreciation for tax purposes.

Depreciation can be defined as a non-cash deduction. You do not have to invest even a single penny to claim it. As any property ages, it begins to witness some wear and tear. The Australian Taxation Office (ATO) does not bar investors from claiming rental and investment property depreciation. It is interesting to note that the ATO has recognised over 1500 items as depreciable assets. You may seek the services of an expert Quantity Surveyor to claim these deductions.

Given below are some key points that you must be aware of while claiming tax depreciation:

Plants and equipment:

The ATO has identified and specified that plant and equipment undergo wear and tear at a relatively fast rate. As a result of this, these items may need to be replaced a little earlier than others. Plant and equipment may include the loose assets or control panels for automated systems in the building. These items include carpets, ovens, blinds, cooktops, AC systems, door closer, garage door motors, and freestanding furniture among others. If you are still facing some confusion, get the Deppro contact number and eliminate all your doubts.

Capital works allowance:

These are based on the past construction cost of the investment property. You will be eligible to claim capital allowances on your actual residential property where it was built after September 15, 1987. It is important to note, you can claim any qualifying renovation or developments completed either by you or the earlier owner. For instance, if you constructed your property in the year 1996, you can assess the cost to construct the property at that time and you will be able to claim 2.5 percent of the value each financial year. The depreciable items are driveway fences, sinks, basins, baths, garages, door & window fittings, etc.  You may also like to read helpful Deppro reviews to clear your doubts.

Can you claim depreciation if it was built before 1987?

To be eligible for depreciation deductions, the building does not have to be new. New and old residential and investment properties will attract depreciation deductions alike.

Depreciation schedule:

You must be aware of depreciation schedules and how they may be able to help you to save money. Any building qualified to claim building write-off allowance has a maximum life of 40 years from the date when construction was finalised. In other words, the owner will be eligible to claim a maximum of 40 years of depreciation on a new building.

Conclusion:

You must prepare your house depreciation report effectively to minimise your tax liabilities. According to research, 15 percent to 35 percent of the construction cost of a residential property is manufactured from plant & equipment items. You should maximise their value in order to maximise your depreciation claim. Your depreciation schedule will outline the specific deductions available on a particular property; the details will come handy for the property investor while preparing a tax return report.

A Depreciation Checklist for Commercial Property Owners and Tenants

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You may find it difficult to comprehend the various tax depreciation allowances available for owners and tenants of commercial property. With increased awareness about Australian tax depreciation, property owners and tenants may make more informed financial decisions and enhance their cash flow. A property owner is eligible to claim depreciation for Division 43 capital works that they have paid for. This may include building, structural additions, and recently constructed or renovated kitchens, outdoor areas, and improved bathrooms. Additionally, Division 40 assets are also claimable that they have paid for and included as part of the tenancy agreement. Tenants may also claim depreciation for building fit-out in case they paid for it as along with machinery, furniture, etc.

Here is the checklist:

1. Capital works deductions:

These deductions are applicable to structural elements of a building. Capital works deductions will apply on bricks, mortar, walls, tiling, flooring, wiring, concrete, mezzanines, etc. These deductions are based on the past expenditures of the building. And, apart from the tourists’ accommodation, they can be claimed on commercial buildings in which construction started after July 2, 1982. Capital works deductions for tourists’ accommodation are eligible to be claimed on building in which construction began after August 21, 1979. Consider these factors when you calculate depreciation for property.

2. Plant and equipment depreciation:

Plant and equipment assets can be defined as those assets that are removable within an income-generating property. It may include hot water systems, ceiling fans, carpets, air conditioners, exhaust fans, light shades, and blinds, among others. Depreciation for plant and equipment assets will be calculated on the basis of the individual effective life of every object as specified by ATO. The actual life of assets tends to differ from one industry to another industry. Therefore, it becomes significant to refer to an expert Quantity Surveyor, as they will ensure that deductions are calculated appropriately.

3. Tax depreciation schedule:

A tax depreciation schedule can be described as a report that includes all deductions in the income-generating property. The report is prepared with the assistance of an expert Quantity Surveyor. It can assist to enhance property owners’ and commercial tenants’ flow of cash. The quantity surveyor will require a few details while preparing a schedule. Amid the vast commercial property types, an expert site inspector will have to carry out detailed scrutiny. In this they will assess the building and floor coverings, specify construction methods, the material used, condition of te property, and workmanship, among other things. The Quantity Surveyor will then use these details to enhance depreciation deductions.

Conclusion:

Tax Depreciation Schedule will remain in existence for forty years. The quantity surveyor will also extend his help to property investors in claiming depreciation on investment property. If you are keen to boost the capital works and depreciation deductions, you must always hire a professional quantity surveyor as they will help in processing known and unknown costs alike. Not to mention, they can also asses the contract of sale and tenancy contracts to make sure that building works and assets are correctly allocated between entities.

Everything You Need to Know About Property Depreciation

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Property investors receive many taxation advantages in Australia. And, this is the reason why they prefer to make their investment in properties all across the country. But, sometimes investors fail to file the Australian tax return and subsequently miss out on the benefits of depreciation deductions. A large number of investors are aware of the various claims available to them for expenses. The expenses may include loans’ interest, council rates, property management fees, repairs and maintenance costs, among others.

Given below are some vital details about property depreciation that you should be aware of:

1. Property depreciation:

When the building begins to age, its shape and the assets inside it tend to wear out. These things depreciate over a period of time. It is worth noting that the Australian Taxation Office or ATO has permitted income-generating properties’ owners to claim depreciation as a tax deduction. Depreciation deduction can be divided into two separate categories. It includes division 43 capital works allowance and division 40 plant and equipment depreciation. It will help in preparing a property depreciation schedule.

2. Significance of capital works allowance:

It pertains to the claims for the wear and tear that takes place to the building structure and fixed objects. Capital work will contain objects such as roofs, walls, doors, kitchen cupboards, and toilet bowls, among others. Any residential building where construction started after September 15, 1987, will make its owner eligible for capital works deductions. The deduction can be sought for up to forty years at the rate of 2.5% every year. Owners of buildings built before 1987 should discover what deductions will remain available as these buildings underwent renovations. The renovations will lead to capital works deductions. Rental home returns have emerged to be highly profitable.

3. Plant and equipment depreciation:

Plant and equipment depreciation are eligible to be claimed for conveniently removable fixtures and fittings available inside the property. There are over 6000 various depreciable assets identified by ATO. It includes carpets, blinds, air conditioners, and smoke alarms among others. Each plant and equipment asset is allocated an individual effective lifespan and depreciation rate. As per the existing legislation, second-hand property owners who exchanged contracts after May 9, 2017, cannot claim deductions for earlier used plant and equipment assets. And, investors who bought new residential and highly renovated properties, commercial real estate will be able to claim depreciation deductions.

4. Importance of claiming depreciation:

It is significant for the owner of the residential property to claim a depreciation deduction. It will help in making a huge difference in an investors’ cash flow. We have discovered that a residential client’s average first-year claim was approximately $9000.

Conclusion:

You may claim the depreciation of your investment property against taxable income. And, seasoned property investors are aware of the benefits of depreciation residential rental property. Some property investors will even take depreciation into consideration prior to buying their next investment property. Anyone buying a property for the purpose of generating income will remain eligible to depreciate buildings and assets inside it against assessable income. It will help to lessen their tax burden and maximize the gains.

Why You Need a Depreciation Schedule for Your Investment Property

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Savvy investors, nowadays, indulge in property investment with the prospect of re-selling the property at higher prices. While this investment decision is highly fruitful, a little know-how of the field can help in making the most of the opportunity.

Depreciation on property is one such aspect that has to be taken into consideration. With the know-how of property depreciation, information on tax depreciation schedules is also vital.

What is a Tax Depreciation Schedule?

Depreciation on a property comes from the fact that as a property ages, its components may suffer from wear and tear. The test of time inflicted upon the property leads to a decline in value. Tax Office provides claim to investors against this depreciation.

In order to claim depreciation from the Tax Office, investors require preparation of investment property depreciation schedule also known as a tax depreciation schedule. The preparation of the schedule should be done by a qualified surveyor, who will make a list of all the depreciable items in the property.

The inclusions in the depreciation schedule will be: depreciation on building allowance; depreciation on equipment; on plant; and, precise calculation of each depreciable item. Depreciation on investment property ATO approval is a must. For which you need professional help to draft it for you.

Preparing a Depreciation Schedule

Property depreciation schedule 80 reflects the numerous benefits of having your property’s depreciation schedule developed, which are as follows:

  1. Creation of tax depreciation schedules on a rental property allows the owner of the property to claim renovations done by the previous owner. The owner can also add any new improvement made on the house into the existing schedule.
  2. Beside the approval of claim, the preparation of schedules allows the owner to weigh their subsequent property investments. Investment property calculator can help them to find out the most lucrative properties in terms of depreciation benefits.
  3. Preparation of Property depreciation schedule 80 allows the owner to claim depreciation on building allowance. This means that the owner will get tax benefits upon the building’s structure like the brickwork, roof and timber work.
  4. Depreciation on plant and equipment can become highly lucrative with the aid of depreciation schedules. This is because it covers those items that can be detached from the investment property. Such items cover as high as 35% of the complete cost of a residential building
  5. The benefits of tax depreciation schedules also include improvement of cash flow. This is owing to the reduction of taxable income. Wealth creation gets much easier when the money has been freed up. These further properties can of course be weighed using Investment property calculator.

Wrapping-Up:

It’s the owner’s responsibility to both deduct the depreciating value upon their property as well to claim it. It is not the ATO’s job to remind them. Depreciation on investment property ATO can be a game-changer for an owner’s investment opportunities. Also, property owners should not forget to use the aid of a qualified quantity surveyor for creation of the schedule on their investment property like Deppro QLD.

 

 

How Rental Property Depreciation Works

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Investment in rental property has emerged a beneficial financial decision. A rental property can be a stable source of earning for beginners. One can reap tax benefits as well on the rental property benefits. You can cut the rental expenditures from the earning of rental income thus bringing down your tax liability. Meanwhile, the other important tax deduction meant for depreciation works in a different way.  Depreciation can be defined as a process which is used for deducting the expenditure of purchasing and renovating a rental property. Instead of taking a single deduction in the year you buy or renovate the property, depreciation distributes deduction throughout the life of the property. Given below are the factors how depreciation for residential rental property works:

1. Which Property is Depreciable?

You must find out first which property is depreciable. As per the rules of IRS, you can depreciate the property if:

  • You are the owner of the property even if it is liable to a debt.
  • You are using it for any income-generating act or business purpose.
  • Property has got a determined useful life and loses its worth as a result of natural factors.
  • The property may last for more than a year.

2. When Will Depreciation Start?

When a property falls in the category of service or is ready to use as a rental property, you can apply depreciation deductions. You may continue to depreciate the property until any one of the conditions mentioned below are met:

  • If you have deducted all the cost or other bases in the concerned property
  • You leave the property from service even if you could not recover the entire cost or other bases. The property will be retired from service the moment it is not being used as an income-generating property. When you destroy it, convert it or leave it, the property will be retired from service. The property report will provide more information regarding when the property may be retired from service.

Depreciation methods:

There are three factors that will help you decide the amount of depreciation you will be able to deduct every year. These methods are the basis in the property, recovery period, and depreciation method.

Given below are the basic steps:

  • Determine basis of the property: Basis of the property is the cost of the property or money you shelled out in cash or mortgage to buy it. Settlement fees, closing costs which may include legal fees, transfer taxes, etc. are included in the basis.
  • Separate land cost and buildings: You can only depreciate the cost of building and not land, so you must calculate the value of each to depreciate the exact amount. You may require the help of experts to prepare a rental property depreciation report.
  • Decide your basis in the house: When you find out the basis of the property and value of the house, you will be able to find out your basis in the house.
  • Decide adjusted basis if required: There are possibilities that you may need to make an increase or decrease to your basis for some occasions. The occasions may take place between the times when you purchase the property until it is ready to be rented.

Final Thoughts:

Depreciation has emerged as a useful method in case you invest in rental properties. It distributes the cost of acquiring the property in the coming years and brings down every year’s tax liability. However, rental property laws witness frequent changes. Therefore, you must work with an expert tax accountant when building, operating or selling your rental property. They will also explain all of the important details of depreciation residential rental property which will prove extremely helpful.

Busting the 7 Myths of Depreciation Schedules

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When it comes to tax depreciation, many myths have been floating around specifically regarding what property investors can claim. As you are aware, tax depreciation can benefit any person with an investment in assets or property. And, there are many who are not aware of the depreciation rules for rental property. You need to work out how much your investment property depreciates to claim these values during tax time. A tax depreciation schedule helps in making your rental property work for you. Here are some common myths of depreciation schedules below:

Myth#1: Commissioner’s actual life ruling needs to be utilised for all assets without any exception

Truth: The Commissioner of Taxation’s ruling is only applicable to the new depreciable property. The role of a quantity surveyor is to boost the depreciation deduction for his client. In order to achieve this, he must calculate the actual life of the second-hand assets. He should not assume that all the assets available in the property are brand new. If the asset is depreciable, you can always claim it.

Myth#2: If the assets in the property get damaged, you won’t be able to claim the balance of depreciation

Truth: Division 43 capital works mentions that if taxpayer’s capital works get damaged, the deduction will be available under Undeducted Construction Expenditure.

Myth#3: On the recovery of a depreciable asset, you can claim depreciation on it

Truth: As many investment homeowners use their property at some stage during the year, incorrect figures may surface in their tax depreciation schedule. The main motive of a tax depreciation schedule is to notify the taxpayers on what they may include in a tax return. It may be illegal or misleading if you don’t check whether or not the property was used for private purpose. You must figure out how to adjust the depreciation amount to the right sum.

Myth#4: All the expenses in obtaining a rental property will be able to get depreciated

Truth: The quantity surveyors consistently find any asset to link any and all expenses to claim a deduction without following the laws. It is wrong. You should claim a repair 100 percent only in the year in which it took place.

Myth#5: Once you have spent money on an asset or a capital work, you are eligible to claim it

Truth: As per Division 40, you should start depreciating the asset only when it is ready for use or already used. You should not start to depreciate it from the exact moment when you purchase it.

You can claim deductions only once construction gets over for capital works under Division 43.

Myth#6: If you can’t find depreciable assets in the Commissioner’s yearly ruling, you won’t be able to depreciate it

Truth: The purpose of the Commissioner’s ruling is to assess the exact lives of assets. Not to calculate what is a depreciable property. A depreciable asset is an investment property with a limited effective life. And, they may dip in value with time. Make sure that you are aware of the ATO property depreciation rules.

Myths#7: Your assets get deducted consistently at a 2.5 percent rate

Truth: The rate at which assets get deducted almost always remains at 2.5%. But, at one point of time, you can get a 4 percent rate. The 4 percent rate will be applicable on the income-producing usage of a building with regard to an industrial manner.

Conclusion:

You can seek the help of a quantity surveyor to prepare a detailed house depreciation report. The quantity surveyor will not only help in busting your myths but also maximise your depreciation deductions.

How Depreciation Works for a New Investment Property

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When you buy or own an investment property, you are responsible for the maintenance and upkeep. But the property also becomes part of your assets, and therefore it gets linked to your tax liability, and therefore you should consider it as part of your investment property calculator.

What is Depreciation?

As per the principles of accounting, any asset loses value with time, and every year its value decreases, this is called depreciation. We see this most commonly when the value of an automobile is calculated by the insurance company every year before calculating the annual premium to be paid for its insurance. The value of the car is reduced every year, and the new premium is calculated as a percentage of this reduced value, not on the basis of its purchase price.

Benefits of Depreciation

The ATO allows property owners to get the benefits of the depreciation that their property suffers. This depreciation on investment property ATO can actually be claimed as a tax deduction while submitting the tax returns. For this, a process has been laid down by ATO, which requires the homeowner to employ the services of qualified professionals.

The Two Types of Calculating Property Depreciation

A building can have two aspects of the calculation of its tax depreciation investment property.

  • The first mode of the calculation of depreciation is on capital works. It includes all the expenses made on the construction of the building. This depreciation can be claimed over a period of forty years. This period has been decided based on the average expected lifespan of a newly constructed investment property.
  • The second mode of property depreciation is based on the value of the assets added to the building. This would include things like upholstery, furniture, electrical, and utility gadgets, etc. The list provided by ATO also lists the expected lifespan of each item. For example, a carpet is expected to last 10 years, while a kitchen stove can be expected to last two years more.

A Brief Process for Claiming Property Depreciation

The tax declaration would need to contain a detailed schedule for you to be able to claim both the types of depreciation listed above. A certified quantity surveyor would be required. This is because actual measurements and enumeration of every small and big component would be needed. Once the list is ready, the calculations can begin.

Based on the age of each component, and the rate laid down by the ATO, the total depreciation amount is calculated. Once the amount is final, then the amount of tax deduction applicable can be calculated.

Conclusion:

Many homeowners are not aware of the depreciation rules. If these rules are properly utilized, a homeowner won’t need to pay more tax than needed. A proper tax depreciation schedule for rental property can also prevent tax deduction being claimed twice for the same component. All that is needed is to utilize the services of a good consultant. The consulting company and its team of quantity surveyors will help you claim the right tax breaks.

What You Need to Know About the Legislation Changes to Rental Property Tax Depreciation Claims

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It’s always quite confusing to adapt to new changes. Similar to the altered legislation to the rental home returns which were observed in 2017. It has been tracked that numerous investors and rental property owners have issues regarding the claims available for them.
To everyone’s relief, what is worth appreciation is that the items under the Capital Works such as the swimming pools, toilets, windows, foundations, walls, and ceilings can be claimed for deductions just like before. There are no changes made to that category.
The alteration has been in Division 40 which includes the subparts of Plant and Equipment category including the electronic appliances, carpets, alarms etc. These are the assets which are extra, in other words, which aren’t a part of the built of the property.
Which Properties Got Affected by The Change?
Well, when summarized, it can be said that the deductions for the above-mentioned category that is the Plant and Equipment is not applicable on the condition that the property was made second hand after 7:30 pm on May 9, 2017. All the investors who have invested in the second-hand property before the mentioned time and date can claim returns on depreciation residential rental property as they used to before.
Also, if a new Plant and Equipment asset is bought after the specified date, it is applicable for claims until the asset’s life remains effective. Lastly, another notable fact is that the investors residing in their building before July 1, 2017, do not have to think about the changes made in the legislation as they are exempted from it.
How to Claim the Right Returns Efficiently?
Sometimes technical terms become quite difficult to understand and analyze and hence it is better to seek professional help rather than trying to be the jack of all trades and master of none. Hence, creating a tax depreciation schedule for a rental property can be extremely easy if done by an experienced, professional quantity surveyor. A person with that profession knows exactly what is to be done for your property and will help you extract maximum benefits by giving you a clear-cut view of your costs, expenditures, and returns.
There are a number of companies providing professional help to people in need of a good tax depreciation schedule and hence you can look out for one such service provider.
The main advantage of choosing this way is that they have immense knowledge about the concerned topic and they are aware of such minor details which can fill up your pockets and make you feel rich by just paying a humble fee for the service.
What after June 30, 2017?
For your information, even if it is past June 30, 2017, you are eligible to calculate depreciation on rental property and submit a tax schedule with your tax returns for 2017-2018. Hence, it’s a win-win situation for many of the investors.
Deriving complete information of such legislative changes isn’t a cup of tea and might leave you confused and unsure of your action despite the hard efforts. Thus, a little bit of assistance and help is never harmful.

Are You Missing Out On Tax Depreciation Claims?

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So many Australians miss out on property tax deduction claims every year. Tax depreciation on property investment is a legitimate deduction which the government allows you to claim. Due to the of lack of information on investment property depreciation rules, tax savings worth thousands of dollars are missed out.

Claiming for a tax deduction on the value of your property seems difficult but with the help of a professional expert, it can become really easy. Claiming depreciation can make a huge difference in a property investor’s cash flow. Despite all of this, it is most often missed.

That is where DEPPRO comes in.

What can be Done to Not Miss Out on Tax Depreciation Claims?

In Australia, only 30% of property investors claim deductions for the depreciating value of their property. It is nothing but a non-cash expense which you can claim every year on your property depreciation. You do not need to spend any cash to make this claim.

You are claiming on the declining value of your building or asset. Of course, there are certain conditions like any other tax deduction. If you have a residential property which was built before 1985, then you can claim depreciation on Division 40, Depreciating Assets only. But if it was built after 1985, then you can claim under Division 40 as well as Division 43.

The Tax Depreciation Schedule

A Quantity Surveyor is an official who is professionally qualified to produce a legal tax depreciation schedule by the ATO. It includes the following two divisions:

  1. Division 40: Depreciating Assets: This element of property depreciation schedule is all about assets like plant and equipment, lights, fans, carpets, floating floorboards, smoke alarms, air conditioners, refrigerators and so on. Every item which has a diminishing life is included in this. The tax deduction calculation, according to the investment property depreciation schedule ATO, is carried out based on the effective life of the items.
  2. Division 43: Capital Works Allowance: The immovable parts of the structure like the building, walls, roof, swimming pool, built-in furniture, toilets etc. are a part of this division. The investment property depreciation rules state that this capital works allowance is calculated on the basis of the construction cost of the building and not the current purchasing price. So if you are buying a property, you can claim a deduction based on the original construction cost while the building was made.

How Can DEPPRO Help You?

We have been in the industry for more than 12 years now and have a passion for tax saving. Our team has industry-leading skills and can assist in all areas of investment property taxations. We are always updated and are well-versed with all the latest Australian Taxation Office (ATO) rulings, investment property depreciation rules, and interpretations for our clients.

The property depreciation schedule made by us ensures that our clients get maximum tax benefits and at the same time it complies with all the latest ATO regulations. If you have the property of your own and make money owning it, get a qualified surveyor immediately to perform a tax depreciation schedule. We have offices all over Australia. Contact the one nearest to you today!

How Does Depreciation Add Value to Your Investment?

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Every investor invests their wealth into a property to earn profitable returns and this is a story prevalent since years. However, this becomes a little tricky with older properties such as an older building. Due to wear and tear from time to time, its value diminishes over time. Wear and tear of a property is a constraint that is considered at all times when you plan to sell out a property. Depreciation tax benefit serves as one of the valuable means to promote the value of commercial or residential property for investors.

If you have invested in a property of late, depreciation can help you to not only retain its value but also get you more out of it. By lowering the overall tax liability, you can save hundreds to thousands of dollars every year on your taxes.

Read on to know more about how you can get more out of tax depreciation investment property.

Tax Depreciation Adds Value to an Existing Building or Structure:

It is important to bear in mind that tax depreciation does not enhance the value of land. It maximizes the value of a property, especially an old building which is subject to wear and tear. Because it may necessitate renovation or maintenance at the subsequent stages, things can get expensive on the part of an investor. Tax depreciation on such properties can help you keep things under your control in terms of charges involved in repairs or renovation.

Tax Depreciation Does Not Involve Any Upfront Payment

Being a noncash deduction, depreciation does not necessitate the payment of upfront charges. However, to overcome various legal hurdles, it is imperative that you gain an understanding of requirements related to depreciation. This will provide you with the right idea to improve the cash flow of your investment.

Tax Depreciation Helps an Investor Conceal a Cash-Positive Rental:

Depreciation has an interesting spin-off. To elude the possibility of paying an extra amount of money, you can use the tricks of the trade linked to the Australian tax depreciation. By following this simple rule, you can make cash-positive rental look like a loss on paper. Of course, you need to reach out to the right consultant to take advantage of this feature.

What Should You Do to Reap the Benefits of Depreciation?

If you wish to enjoy the positives of depreciation on investment property ATO, the most important thing you need to do is follow the rules. This will help you keep abreast with the ways in which you can benefit from depreciation in the best possible manner.

Because it is easier said than done to deal with the ins and outs or the technical details of the rules related to depreciation, you should consider hiring a professional. Think about consulting an accountant to ensure that your practices are in line with the rules. This is the sure-fire way to benefit from depreciation as an investor.