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Complimentary Feasibility Study

CHATTEL DEPRECIATION

• Did you know….?

   

  ·        Your rental property is considered a business per IRS rules if you collect money for rent

  ·        The personal property (chattel) in your rental can be depreciated from your income tax

  ·        You can use accelerated depreciation for chattel on your income tax

   

   

  What are Chattels?

  •  Personal property used in your income generating real estate property

   

  •  Anything owned and tangible

   

  •  Anything with a depreciable life per IRS guidelines

   

  •  To be depreciable, the property (chattel) must meet the following requirements

  •  It must be property you own

  •  It must be used in your business or income-producing property

  •  It must have a determinable useful life

  •  It must be expected to last more than one year

   

  Chattel depreciation is….

  •   A perfectly legal but little known method of savings thousands in tax dollars

  •   A method of segregating personal property (chattel) from real property and evaluating chattel to apply a cost basis per set criteria

  •   Allowable for accelerated depreciation per IRS guidelines (allows for depreciation of property over 5, 7, 10, or 15 years)

  •   A method for real estate investors to retain some of the residual loss resulting from property use in rental property

   

   

  Background

  •   Most investors divide cost of real estate between the building (depreciable) and land (not depreciable)

  •   Building gets depreciated over 27.5 years (straight line)

  •   Capital gains realized from rental income may place you in a higher tax bracket

  •   Chattel depreciation may offset (or eliminate!) your capital gains and lower the amount owed to the IRS

   

   

  IRS Guidelines on Depreciation

  •   Stoves, dishwashers, carpeting, draperies, other furnishings – 5 years

  •   Refrigerators – 7 years

  •   Land improvements (landscaping, shrubbery, fencing, cement, patios) – 15 years

  •   Buildings, structure – 27.5 years

  •   Land – not depreciable

   

  
  

  RUI takes all the legwork in figuring out what can be depreciated as chattel. 
  
  RUI will….

  –   Perform an on-site review to identify all allowable chattel

  –   Inventory and document your property

  –   Digitally photograph all chattel

  –   Analyze and apply cost to available chattel

  –   Format the data and generate a depreciation schedule

  –   Provide the owner with a portfolio including

  •  Overview

  •  Summary chattel values

  •  Depreciation schedule (to provide to your CPA)

  •  Photographs

  
  (Learn more about our Continuing Education offerings)