Happy Thanksgiving - Lets Stir The Pot With My Unpopular Opinion

[Chris Seveney]

Lets get right to it. Real Estate should not be depreciated.

Depreciation is one of the most beloved tools in real estate investing, but let’s take a moment to challenge the norm: Should real estate even qualify for depreciation? My argument is simple—real estate, unlike most assets, doesn’t actually lose value over time. In fact, it often appreciates.

To go a little deeper:

Depreciation was designed for assets that wear out or become obsolete over time, like machinery or vehicles. But real estate? Land doesn’t depreciate, and while buildings require maintenance, they usually gain value as markets grow, demand increases, and inflation takes its toll.

Real estate investors benefit from a significant tax write-off based on the concept that properties lose value over time, even as their market value skyrockets. In a way, depreciation creates a disconnect between the tax code and the economic reality of real estate.

Some argue that depreciation accounts for wear and tear. But we already get deductions for maintenance, repairs, and improvements. Why double-dip?

I know this is unpopular opinion as we all take advantage of it (including myself), but should real estate really be allowed to be depreciated? I can absolutely see an argument against it.