alt Hacker News>create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place
They're only deferring the tax on $70-80K, correct?
>create a $70-80K writeoff on a $120K asset, which often larger than the check they cut for the property in the first place
They're only deferring the tax on $70-80K, correct?
> They're only deferring the tax on $70-80K, correct?
Yes, if they sell normally. But usually capital gains tax is lower than that on the income so overall they're saving.
To be explicit: They use the $70-80K depreciation to offset their rental income (which often means they pay no tax on the income for that year and several years after). They'll pay it eventually when they sell, but at a (usually) lower tax rate.
There are tricks like 1031 exchange to avoid paying taxes when they sell, but I don't know how depreciation benefits factor in to those.