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Depreciable Allowance
Useful Links > Glossary > Depreciable Allowance
1031 Tax-deferred Exchange
After Tax Cash Flow
Appreciation
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Depreciable Improvements
Depreciable Years
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Name
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Depreciable Allowance
Depreciation is the decrease in value of an asset. Real property can physically depreciate due to physical deterioration, functional obsolescence, or due to external influence. For the purpose of investment analysis, depreciation is a term used for tax purposes. For tax purposes, land cannot be depreciated. Depreciable allowance is the amount you are allowed to depreciate per year, which can be deducted from your taxes. Always consult a tax professional with issues involving taxes. (see depreciable improvements and depreciable years)

Calculation
Depreciable Allowance = Depreciable Improvements / Depreciable Years

Example
In this example, the depreciable improvements are $270,000 and since it is a newly purchased residential income property, it can be depreciated over 27.5 years.
Depreciable Allowance = $270,000 / 27.5
Depreciable Allowance = $9,818

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