Depreciation

IRS Website

The Basics

The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction.

What Rental Property Can Be Depreciated?

You can depreciate your property if it meets all the following requirements.
  • You own the property.
  • You use the property in your business or income-producing activity (such as rental property).
  • The property has a determinable useful life.
  • The property is expected to last more than one year.
Property you own.   To claim depreciation, you usually must be the owner of the property. You are considered to be the owner of property even if it is subject to a debt.

Property having a determinable useful life.   To be depreciable, your property must have a determinable useful life. This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes.

ACRS Depreciation

Most business and investment property placed in service after 1986 is depreciated using MACRS.
This section explains how to determine which MACRS depreciation system applies to your property. It also discusses other information you need to know before you can figure depreciation under MACRS. This information includes the property's:
  • Recovery class,
  • Applicable recovery period,
  • Convention,
  • Placed-in-service date,
  • Basis for depreciation, and
  • Depreciation method.

Depreciation Systems

MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS.