How to Calculate the Depreciation on Rental Property

There are two benefits of calculating depreciation on the rental property. One is, it will decrease your total taxable income. Second is, you can make plan of repair or new improvement after lapse of active life of property. So, if you want to get above two benefits, you should calculate the depreciation on your rental property.

There are lots of tool which can calculate the depreciation, if you will add the information of the value of your rental property and active life. So, today will teach you the steps to calculate if you have to calculate manually.

Steps to Calculate Depreciation on Rental Property:

1st Step : To Calculate Rented Property Area

You can depreciate the property which is given for rent. You can not depreciate your personal property for your income tax purpose. Measure the area which being used for your renting business. For example, it may be 50% or 60% or any % of total area. It is helpful for calculating the cost of your rental property.

2nd Step : To Calculate the Cost of Building

We calculate the depreciation on the structure of building not on land of building. If you have total cost of property including the land, you should deduct the cost of land. If you have done any improvement before giving it on rent, you will add in it. You will calculate the cost of rental property on the basis of rental area which we have calculated in first step.

3rd Step : To Calculate Annual Depreciation 

There are different system and methods of calculating depreciation in different country. In India, we use diminishing method of calculating depreciation with 10% rate or any updated rate by income tax department. In other country, it is calculated with straight line method and on the basis of the active life of rental property. Generally, we divide the cost of rental property with 27.5 years.

Example : Suppose, we have duplex and its cost is $ 3,15,000. Half of this, we are using for personal use and half for rent.Total cost of land which is used, is $ 2,00,000. Total improvement cost is $ 15,000. Now, will calculate its annual depreciation with following way.

 Rental Property Depreciation Calculation
In Dollar
Total Cost of Property 315000
Less Cost of Land 200000
Less Cost of Improvement before place in service 15000
- 215000
Less Cost of Property for Personal Use (50% of total area) 50,000
Cost of Rental Property 50000

   Annual Depreciation = 50,000 / 27.5 = $ 1818.18







access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
Accounting Education: How to Calculate the Depreciation on Rental Property
How to Calculate the Depreciation on Rental Property
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock