WHAT IS DEPRECIATION:

Depreciation is an accounting term that deals with spreading out the cost of a capital asset over its estimated useful life or through a decrease in the usefulness, and therefore value, of real property improvements or other assets caused by deterioration or obsolescence.

Depreciation is one of the major benefits of owning commercial real estate as it typically provides for an additional tax deduction. Many commercial properties will be depreciated over 39.5 years, while some or all of the interior finishes may be depreciated over a shorter period of time to speed up the depreciation. While land is not typically depreciable, certain improvements such as a parking lot or monument sign may be depreciable.

To maximize the amount of value you can depreciate with any commercial real estate asset, it is important to consult with a qualified CPA.