Multifamily Depreciation Question - 27.5 or 39 Years?

[Jon Begley]

I have a 10 unit apartment building that is considered a commercial property by the bank, but does the IRS still consider this a residential property? I was reading this article Real Estate Depreciation: A Deeper Look and it implies that multifamily properties over four units are still considered residential in terms of depreciation (27.5 years). Is this correct, Thanks

[Logan Allec]

Yes, it's still residential rental property depreciated over 27.5 years.  According to  “residential rental property” means any building or structure if 80 percent or more of the gross rental income from such building or structure for the taxable year is rental income from dwelling units.  A 10-unit apartment building clearly passes this test as presumably 100 percent of the gross rental income is rental income from dwelling units.

How the bank classifies the building is irrelevant in determining the tax depreciation method.