Definition of Depreciation

In real estate, depreciation refers to the decrease in a property’s value over time due to factors such as wear and tear, aging, and obsolescence. Depreciation affects both residential and commercial properties and can impact the property’s resale value and tax implications. For tax purposes, property owners can claim depreciation as a deductible expense, spreading the cost of the property over its useful life, as defined by tax regulations. It’s essential to note that depreciation applies to the property’s improvements and structures, not the land itself.

Related terms

1. Appreciation
2. Capital improvements
3. Cost basis
4. Effective age
5. Obsolescence
6. Property valuation
7. Straight-line depreciation
8. Tax deductions

References

• Investopedia: “Depreciation in Real Estate”
• IRS Publication 946: “How To Depreciate Property”
• Realtor.com: “Understanding Depreciation: What It Means for Homeowners and Investors”