Calculating depreciation for the rental property has two advantages. One of them is that it will lower your overall taxable income. The second is that after the property's service life has ended, you can make plans for repairs or new improvements. So, you should compute the depreciation on your rental property if you wish to receive the above two benefits. So let’s get started with the rental property depreciation calculator.
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How to calculate depreciation on rental property?
An independent house has about 60 years of productive life on average. The entire functional age of the building and the number of years following construction must be taken into account when calculating the depreciation of the property. Keep reading to know how do you calculate depreciation on rental property.
Depreciation is calculated by dividing the number of years since construction by the structure's overall useful life. The building's current price can be calculated by subtracting the formula's result from the selling price of the home or structure. It is not the full cost of the land, though.
The cost of the land should be taken into consideration.
Let's use an example to better understand how do I calculate depreciation on rental property:
For example, a person wants to sell his property that's been around for ten years.
The price of the land at the time of purchase was Rs. 40 lakh.
The price of construction is Rs. 30 lacks.
The appreciated land value is Rs.55 lacks.
The total useful age is 50 years.
The age of the structure, measured in years since construction, is 10 years.
Thus, using the above formula,
The property has a depreciated value of 10/50, or 1/5.
Subtract this depreciation from the construction cost of the building and add the increased land value to get the property's market worth.
Depreciated building price = Rs. 30,00,000 x (1/5) = Rs. 3.33 lakh
= Rs. 30,000,000 - Rs. 6,00,000
= Rs.24 lakh rupees
Add the increased land value or Rs. 55 lacks, to this.
Hence, the final market value that a person might state is around Rs. 79 lacks.
The rental property depreciation calculator method must be clear to you now.
Read More: How to calculate depreciation of a building? Which method is approved by income tax for depreciation? How to calculate depreciation as per Income Tax?Your Feedback Matters! How was this Answer?
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How do you calculate depreciation on a rental property?
Purva
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2023-03-20T19:45:35+00:00 2025-02-12T23:04:07+00:00Comment
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