Depreciation (Tax)

Updated 2026-05-17

Depreciation, in the context of real estate investment, refers to the tax deduction allowed for the gradual wear and tear, deterioration, or obsolescence of an income-producing property over its useful life. It is a non-cash expense that reduces a property owner's taxable income, even if the property is actually increasing in market value.

For tax purposes, the value of the land itself cannot be depreciated, only the improvements (buildings and other structures). This tax benefit is a significant advantage for real estate investors, as it can lower their overall tax liability.