Straight-line method for investment properties

Question 1

What is the straight-line method?

Answer 1

A commonly used way to calculate depreciation, used for tax deductions

The straight-line method spreads the cost of an asset evenly over its useful life.

Question 2

What is the recovery period for a residential rental property?

Answer 2

27.5 years

This is the period over which the cost of the property can be depreciated for tax purposes.

Question 3

Is land depreciable?

Answer 3

No

Land is considered to have an indefinite useful life and does not depreciate.

Question 4

Calculate the yearly depreciation for a residential rental property valued at $300,000 with a building value of $250,000.

Answer 4

$9,090.91 per year

Calculation: $250,000 / 27.5 years = $9,090.91.

Question 5

What is the recovery period for a nonresidential income-producing property?

Answer 5

39 years

This is the duration over which nonresidential properties can be depreciated.

Question 6

Do depreciation deductions apply to primary residences?

Answer 6

No, they only apply to investment properties

Primary residences do not qualify for depreciation deductions under current tax law.