Real Estate Math
A Minnesota investor buys a warehouse for $750,000 and depreciates it for tax purposes over 39 years (commercial property). What is the annual depreciation deduction?
A$15,385✓ Correct
B$15,000
C$25,000
D$18,750
Explanation
Annual depreciation = $750,000 / 39 years = $19,230.77, approximately $19,231. Note: Only the building value is depreciable, not the land. If the land is worth $150,000, only $600,000 would be depreciated: $600,000 / 39 = $15,385. Commercial property depreciates over 39 years for federal income tax, while residential rental property depreciates over 27.5 years.
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