Contrary to popular belief, depreciation does not fully eliminate the need to pay taxes… But it can delay them substantially.
The tax code favors real estate investment because the government, as one of its duties to its citizens, is to provide affordable housing. To do so, the government provides incentives to spur on this type of investment. One of the coolest things about investing in real estate is a little thing called depreciation. This accounting expense can seem almost magical, but it is rooted in the truth that since assets tend to wear out over time, we account for that reduction in value, deducting the cost of an asset over its useful life.
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