Question about depreciation and Prop Analysis Worksheet

[Steve Maye]

I am new. I have been working with the Property Analysis Worksheet and have a question about depreciation. Depreciation is the amount we can claim as a loss each year against our profit. If the property really does not lose value or is not damaged is it really a loss? Does the government somewhere come back to claim all these amounts that have been claimed as depreciation on your taxes?

27 CASH FLOW BEFORE TAXES....$4,392

28 Add Back: Principal Payments.....$3,022 Principal Paid on Loan

29 - Depreciation.................$(7,273) Tax Depreciation on Building

30 TAXABLE NET INCOME (LOSS)........$141

[Doug French]

Not a professional and this is just the 1000 mile view. IRS taxes you on the gain on a property when you sale (sales price minus basis equals gain). You basis is your original purchase price plus major improvements minus depreciation. You can not choose to take deperciation against your basis. The IRS will make you take the deduction from your basis whether you take it yearly on your taxes or not. My plan is to defer taxes as long as possible through 1031 exchange and estate planning.

Again, this is the 1000 mile view. Calculating basis, depr, & taxable gain is much more complicated.