Depreciation as profit?

[Kikko Maeyama]

Hi everyone. In calculating on rental property cost/benefit, is it appropriate to consider annual depreciation amount that an investor gets to deduct from income tax filing as part of profit? Thank you.

[Natalie Kolodij]

It will reduce your profit on paper- making your taxable income lower. 

Try to think of it as an expense used to calculate your taxable income or loss. Depreciation is what causes many rentals to show a loss on paper. 

At the end of the year if you have $3k in the bank after all expenses you PAID out depreciation won't increase that. Make sure your calculations for cash flow vs. taxable income are different.