Depreciation Expense or Depletion

[William Brennan]

Can someone please explain what the use of depreciation expense or depletion on a rental property is?  I understand how the number is calculated.  I'm a little unsure of the tax implications and how that works.  It just seems to me like it is nearly doubling your mortgage payments for the year!

Thank you in advance

-Will

[Dave Holland]

William Brennan your analysis is spot on. You could very well be cash flow positive on the property and have what we call a "paper loss" which means you show a loss or significantly less gain due to depreciation expense.

Depreciation may be the biggest tax advantage to owning real estate. Let me know if you have other questions.