Which depreciation method is used to depreciate rental property on your income tax returns?

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Study for the Burk Baker National Test. Use flashcards and multiple choice questions with hints and explanations to prepare effectively. Get ready for your exam!

Multiple Choice

Which depreciation method is used to depreciate rental property on your income tax returns?

Explanation:
Depreciation of rental real estate is handled with straight-line depreciation under MACRS. You take the building’s depreciable basis (cost of the property minus land, since land isn’t depreciable) and spread it evenly over the 27.5-year recovery period for residential rental property. Each year you deduct the same amount: building basis divided by 27.5. This approach reflects a steady wear-and-tear expectation over time. The other depreciation methods listed aren’t used for rental real estate on federal returns.

Depreciation of rental real estate is handled with straight-line depreciation under MACRS. You take the building’s depreciable basis (cost of the property minus land, since land isn’t depreciable) and spread it evenly over the 27.5-year recovery period for residential rental property. Each year you deduct the same amount: building basis divided by 27.5. This approach reflects a steady wear-and-tear expectation over time. The other depreciation methods listed aren’t used for rental real estate on federal returns.

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