Most of the time, when you hear the word “depreciation,”
it’s not a good thing. It means that something you had, that was of value, is
suddenly of less value When it comes to your taxes, however, depreciation can
actually be a good thing. When you owe taxes, the so-called “depreciation
deduction” can help you to reduce tax liability.
Understanding Depreciation
The first thing you need to understand is what, exactly,
“depreciation” means. This term refers to income tax deductions that property
owners can take advantages of. Their assets, meaning their properties,
depreciate over time, and thus it makes sense that their taxes should too.
The IRS has an annual allowance for property deterioration
already, though, as with all things related to the IRS, there are regulations
and exceptions. In general, though, as long as the property is owned by the
taxpayer and isn’t being used on rented or borrowed assets, it’s fair game.
Also, keep in mind that the properties to have to have existed for over a year
and be used for business or income related purposes.
Determining Depreciation
Once you have determined that you do, indeed, qualify for a
depreciation benefit, your next step is to determine what the benefit amount
is. Generally, this is the stage where it’s best to consult a qualified tax
advisor. However, do be aware that the following factors all go into
determining the depreciation benefit:
l The
property’s original price
l The
type of depreciation that has occurred
l How
long it would feasibly take to restore the property to its original value, if
possible
Your tax professional can help you to navigate and
understand these factors and to thus apply for the correct depreciation
benefit, so if you are a property owner, seek help today to qualify for this
excellent benefit and save money on your taxes.