Resources - Financial Terms

Depreciation is the loss in value of an asset or building over time due to wear and tear, physical deterioration and age. The IRS allows you to depreciate income producing properties over their useful life, which is determined by law. Current law requires that residential-income properties must be depreciated over 27.5-years and commercial-income properties over 39 years.

Capital improvements are subject to the same depreciation method as buildings. Capital improvements include a new roof, new siding, a new addition to a building, etc.
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