@Carl wrote:
What many folks don't realize is that depreciation is not a permanent deduction. If/When you sell the property in the future, you are required to recapture all depreciation taken and pay taxes on it in the tax year you sell.
Not to get sidetracked here, but that line of reasoning completely ignores the time value of money which, over the course of the standard 27.5 years, should factor quite a bit into the matrix.
Whatever the amount of tax based upon recaptured depreciation deductions, the taxpayer is returning that tax in much cheaper dollars than when the deductions were taken (and presumably resulted in a tax savings).
The foregoing is really just basic economics, but there are also a couple of scenarios where accumulated depreciation is either never recaptured (e.g., the death of the owner) or deferred (e.g, a 1031 exchange) and they should be taken into account as well.
