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We had this conversation today at lunch…how investing in real estate can reduce or eliminate completely your taxable income making it possible to legally not have to pay taxes. How’s is it accomplished? It’s accomplished through something called “DEPRECIATION”. Here’s some insight as to how it works. If you want to learn more let me know!!!!

Depreciation in real estate refers to the process of deducting the costs of purchasing and improving a rental property over its useful life. For tax purposes, depreciation allows real estate investors to spread out the expense of the property and claim a portion of that cost each year, thereby reducing taxable income.

In the U.S., the IRS allows residential rental properties to be depreciated over 27.5 years and commercial properties over 39 years. Depreciation applies to the building, not the land, as land is not considered to lose value over time.

While depreciation is a non-cash expense, it can still provide substantial tax benefits by offsetting income from the property. When a property is eventually sold, however, the IRS may require depreciation recapture, which involves paying taxes on the depreciation deductions previously taken.