Why depreciation is an advantage?

Question

I'm new to the game and confused about the depreciation if someone could help me understand it better.

I have watched so many videos and google everyone says depreciation is a big advantage.

here is what I confused about:

if I owned an LLC and go out to buy a printer for my LLC then the cost of the printer is tax write off in the same calendar year right?

the same thing if I go out and buy a property for my LLC should the cost of the property is tax write off in the same calendar also?

so another word is instated of tax write of in 1 year the IRS makes you write it off in 27.5 years. if so why is this so advantage?

and also if I buy a new A/C unit for this property what is the advantage of depreciation vs write off in the same calendar year?

thank you very much in advance

Le

Michael Plaks · Answer

I doubt so, based on your question and the response you received :)

If we were allowed to write off the entire cost of the property - it certainly would've been better than having to depreciate it over 27.5 years. When people talk about benefits of depreciation, they do NOT mean that it is somehow better than writing the whole thing off immediately. But you must depreciate real property and are not allowed an immediate deduction.

Benefits of depreciation happen not when buying a property but while owning and operating it. You get to deduct a portion of the property's cost every year, even though you're not actually writing a check for that amount. It looks like you're deducting the money you don't really spend - which is nice, kind of.

In reality, that impression is deceptive, but this would be a completely different conversation.

Ashish Acharya · Answer

Simple answer -

Printers actually depreciates. When you sell printer at the end of it life, you will have to dispose it. Retire it. It is completely depreciated, lost its value.

Generally, RE doesn’t not depreciate.You get deduction but you had an appreciation, which is why you have to recapture deprecation. But there are many ways defer/avoid that.

Writing off the same year gives you advantage because of the time value of money. Very powerful if used properly. Also, option of deducting in the 1st year gives you tax planning strategies if you were expecting more income one year, take 100 depreciation that year, if not spread it out. Just an example.

Anh Le · Answer

Thank you so much for the quick reply, I got it now