Real Estate Math
What is the annual depreciation on a residential income property purchased for $280,000 (land value $30,000) using IRS straight-line depreciation over 27.5 years?
A$10,182
B$9,090✓ Correct
C$10,909
D$7,273
Explanation
Depreciable basis = $280,000 − $30,000 = $250,000. Annual depreciation = $250,000 ÷ 27.5 = $9,090.91 ≈ $9,091. Using $280,000 ÷ 27.5 = $10,182. But if land is excluded: $250,000 ÷ 27.5 = $9,090. The IRS uses the full cost less land. Answer: $9,090.
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