No, there is no advantage to not claiming your depreciation on your rental real estate, it is a disadvantage, and it will affect the recapture of your depreciation when you sell. You are not legally required to depreciate your rental property but if you do not depreciate your rental property, you are losing a portion of your profits. If you sell the property, the recapture of your depreciation (even if you did not take it) is taxed up to 25%.
Since rental property activities are passive, there is a limit to the amount of the passive losses that can offset your income. If you are an active participant in your rental activity you can deduct up to $25,000 of your rental loss. There are two requirements to determine if you actively participate in your rental property activities which are:
- You own at least 10% of the property
- You make major management decisions: making rental terms, deciding new tenants, and approving improvements.
If the amount of your passive losses exceeds the amount that you can report on your tax return, it will be carried over into the next year(s) until you have a profit and can be deducted from your profit.
Please review the TurboTax article Rental Real Estate and Taxes for further information.
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