Music. In this episode, we will be discussing depreciating rental property for landlords. The IRS allows landlords to deduct the original cost of rental property from their taxable income by depreciating it over twenty-seven and a half years. However, the land must be excluded. Only the dwelling or structure can be depreciated since the land never gets used up or worn out. You cannot deduct the portion of the purchase price attributed to the value of the land. You can depreciate almost any type of structure, including homes, multifamily buildings, storage sheds, detached garages, swimming pools, and even landscaping. Calculating the cost of the deduction is easy. Watch the following instructions to see how. First, you need to determine the property basis. Take the purchase price of the property and subtract the value of the land. For example, a $150,000 purchase price with a land value of $20,000 would yield a $130,000 property basis. Next, you need to calculate the deduction. Divide the property basis amount by twenty-seven point five to determine how much you can deduct each year you own the property, for up to a maximum of twenty-seven and a half years. So, a $130,000 property basis divided by twenty-seven point five would yield a $4,727 deduction. When it's time to prepare your tax return, the IRS Form 4562 is used to report the depreciation and amortization. The final figure is reported on Schedule E of your tax return, where you deduct it from your gross rental income. It's important to note that accurate records for each rental property, including a worksheet showing your calculations, should be maintained. Most tax preparation software should provide proper documentation. Music. You.