How Long Does the Depreciation Period Usually Last?
Instead of deducting your asset in the year in which you pay them (as a regular deduction), you distribute your deductions over a certain number of years (called the "recovery period").
The IRS provides predetermined recovery periods, depending on how long it estimates that an asset will take to run out or before it runs out.
The IRS also offers more than one possible method to distribute the total depreciation amount for each year. These methods go by names like "straight line" (the same amount every year) and “accelerated” depreciation.
Regarding the depreciation methods, in this guide, we will not go into much further detail. For your reference, we recommend you to consult "Every Landlord’s Tax Deduction Guide", by Stephen Fishman (Nolo), and in IRS Publication 946, “How to Depreciate Property”.
In the case of residential real estate and structural components, the deduction extends over 27.5 years. This is the period when it is assumed that the buildings have become "dilapidated." Of course, the land itself will not wear out, meaning that it cannot be depreciated. In this case, you have to subtract its value from your purchase price before taking the depreciation deduction.
This is true even for condo owners. Although you do not own any land individually, you still have a joint interest in the land, and the size of the land must appear in your writing.
The recovery cycles for other assets are much shorter, in most cases 5 to 7 years. The shorter the recovery period, the sooner you will get the full value of your deduction. For that reason, you will probably need to do some research before deciding how to claim your deduction.
While doing your research, keep in mind that there have been discussions between taxpayers and the IRS about many issues, such as whether carpeting is personal property (with a 5-year recovery period) or a structural component (with a 27.5-year recovery period).
Finally, you might wonder what happens once you sell your property before the recovery period ends. In this case, you cannot continue to take the deduction. In fact, you must stop taking depreciation for any asset that you either sell, destroy, dispose of, or stop using for your rental business before the recovery period ends.