Depreciation is the process of deducting the value of the asset and any improvements against your taxes. Depreciation of a rental property is spread out over what is deemed its useful lifetime by the IRS, which is, in this case, 27.5 years.
It’s important that you do deduct the depreciation as you will have to pay some of it back through depreciation recapture upon the sale of the property whether you claim it or not.
The actual amount of the depreciable amount can vary depending on a variety of factors. As such it’s recommended you consult a licensed tax professional when calculating this.
You can track depreciation in the Landlord Studio software as a recurring expense.
To create a recurring expense on mobile:
Step 1. Navigate to the relevant property via the left-hand menu.
Step 2. Go to the expenses section and select add a new expense.
Step 3. Enter the amount, the initial depreciation date, and the repeat interval.
Note: the initial depreciation date is the date that the property was placed in service. This is normally when you start actively looking for a tenant.
Step 4. Set the category as “Depreciation”
Note: you can create new categories in the setting.
Step 5. Add any relevant notes.
Step 6. Mark it as paid.
Step 7. Hit save.
To turn off the recurring expense or edit the depreciation amount, simply click on the recurring expense to edit or delete it.
To create a recurring expense on desktop:
Step 1. Navigate to the relevant property, scroll down and click Add New Expense.
Step 2. Enter the amount, the initial depreciation date, and the repeat interval.
Step 3. Set the category as “Depreciation", add any relevant notes, and mark as paid.
Step 4. Hit save.