Denver, CO · Member since 2008 · 25 posts · 16 votes
17y
Hey Josh, to answer your question in more depth, you are allowed to depreciate your building (not the land) over a 27.5 year period. The advantage of this is that on paper it makes it so you look like you took a net loss when you really (hopefully) took a net gain. The IRS will give you a portion of your losses back. Lets say you make a net income of $2400 a year and your depreciation is $100,000 / 27.5 = $3636. It actually looks like you lost $1236 that year. The IRS will you give you back a nice chunk of this. If you start to make over $100,000 from your job and you are a part-time real estate investor, benefits like these will start to go away and they will go away completely at $150,000. However, those numbers are based on your "modified adjusted gross income" so if you contribute to your 401k or pre-tax medical plan it will look like you make less money.