Depreciation
TaxesThe gradual reduction in the value of an asset over time, used as a tax deduction for business and rental property owners.
Example
Example: You buy a rental property for $250,000. The building (not land) is worth $200,000. The IRS lets you depreciate residential property over 27.5 years: $200,000 / 27.5 = $7,273/year in depreciation deductions. At the 24% tax bracket, this saves you $1,745/year in taxes — real cash savings on paper losses.