Capitol Depreciation

[invst4profit]

Does anyone not claim capitol depreciation on there income taxes for there rental properties and why?
Or better yet what is your reasoning for or against claiming the deduction?

I need to determine the actual advantages verses disadvantages concerning my particular situation.
This is a new property for me and the last one I will own. My present plans are to sell this one in 10 years at age 65. I will be retiring from full time employment at the end of this year with a 1/3 reduction in pay. My income may possibly fluctuate some what over the next 5 years due to other temporary sources as well as I expect the rental income to increase and some deductions (interest) will be reduced.
I will also likely provide a substantial VTB to the next owner possibly up to 75% of purchase.
What are the tax implications at time of sale and is it possible to determine the best approach at this initial stage on this property?

 

[Nir]

Hi Greg, Good questions!

My accountant recommended deducting it when selling only not every year. this way you can reduce tax significantly when selling I guess: a cumulative depreciation for all the years!
However each situation is unique and perhaps in my case losses were shown in first years even without depreciation so why depreciate early. on the other hand tax saved today is higher than when selling because selling you pay tax on only 50% of profit and a deduction now is full tax savings...i think. hmm.

Regards,
Neil

 

[navaz]

Typically we work on individual basis looking at marginal tax rates- so there isnt a blanket answer to your question