Sorry @Scott Trench but this isn't quite how depreciation works:
For one, you can only depreciation the improvements, not the full cost. With the 80/20 rule of thumb (there are better ways to do this), the improvements would be $288K. You depreciation residential properties over 27.5 years, not 30. Those two offset vs. your calculation, so the net result is about the same.
But you are correct that the depreciation you take each year reduces your tax bill. But if you sell after 27.5 years, your remaining basis will be only $72K. So, say you sell it for $720K (doubling in value after 30years). You would have $648K in gain. Of that, $288K would be subject to the recapture tax at 25% and the remaining $360K would be subject to long term capital gains at 15%. So while you're saving 28% each year as you hold the property, you're paying a big chunk of that back if you sell.
And that assumes tax law remains unchanged. That's definitely a bet I won't take.
Not to say that deferring the tax bill is bad. Its not. But depreciation is less valuable than many gurus and sellers make it out to be.
And its often slapped on crummy rentals as lipstick. Say you're just above break even with real expenses. You subtract depreciation and you get a passive loss. No problem, says the seller, you can use that to offset other income. Yeah, right. If your AGI is under $100K you can do that, up to $25K in passive losses. Over $150K (that's for a couple, too), you cannot. In between it phases out. Now I know that's a lot of money but I would say many people who are investing in rentals are relative high income. So, this is a consideration. And one that's often overlooked by people selling crummy rentals.
