Can depreciation deduction increase with property value?

6 Replies

My properties have appreciated significantly over the last year and the city has reassessed these at significantly higher values which means a new larger tax bill. Am I able to increase my depreciation deduction based on the new values to offset this or am I stuck at the same rate that I started taking depreciation at? My initial depreciation is based off of the purchase price, so if I am able to increase it does the new value have to be based on anything in particular (tax assessment, appraisal, zillow estimate)? 

Originally posted by @Josh Webb :

My properties have appreciated significantly over the last year and the city has reassessed these at significantly higher values which means a new larger tax bill. Am I able to increase my depreciation deduction based on the new values to offset this or am I stuck at the same rate that I started taking depreciation at? My initial depreciation is based off of the purchase price, so if I am able to increase it does the new value have to be based on anything in particular (tax assessment, appraisal, zillow estimate)? 

 Unfortunately depreciation is solely based on your purchase price. The IRS looks at how much money was spent. The only time your depreciation basis in a property will increase, is if you add more money into the property via capital improvements.

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Depreciation is based soley on the purchase price and improvements. 

An option you could utilize would be to take out that appreciation via a HELOC or Refinance and if you use those proceeds to purchase additioanl real estate then you would be able to depreciation that new property.

Originally posted by @Natalie Kolodij :

Depreciation is based soley on the purchase price and improvements. 

An option you could utilize would be to take out that appreciation via a HELOC or Refinance and if you use those proceeds to purchase additioanl real estate then you would be able to depreciation that new property.

 That’s great advice. I’m looking to do just that right now. Thanks!

Are you allocating your purchase price between land and building? Land can't be depreciated.