How Investing In Residential Real Estate Can Lower Your Tax Bill!

Have you thought about investing in residential real estate? There are many benefits to owning investment property and one of them is depreciation and its tax benefits.


Your residential rental property is depreciable! As an investor, you’re able to write off the structure and improvements over a period of time on your taxes. First, separate the cost of land and improvements, as land cannot be depreciated. You can typically find land values in your property tax records. The IRS allows the value of improvements to be depreciated over a period of 27.5 years. Here is a simple formula for estimating your depreciation deduction:

Cost of Property – Land Value = Improvement Value
Improvement Value / 27.5 years = Yearly depreciation deduction

You can deduct your yearly depreciation from your income, lowering your tax liability!

Cost Segregation

Another option to increase your depreciation amount is through cost segregation. Cost segregation studies are commonly used in large multifamily or commercial properties, where an engineer separates out structural property (27.5 year) from real or personal property (15 or 5 year). Low cost software options have made cost segregation feasible for single-family homes now as well! By separating 15 year property or 5 year property from the 27.5 property, you are now able to depreciate more today rather than dividing it evenly over 27.5 years. See an example of a single-family cost segregation study here!

Bonus Depreciation

With the Tax Cuts and Jobs Act of 2017, bonus depreciation was introduced. This allows investors to depreciate all 20-year property & under TODAY! Instead of depreciating personal property over the next 5 years or improvements over the next 15 years, investors can take the full depreciation amount this year. This can equal a sizeable deduction that will help shelter your income and may even bump you down a tax bracket.

This is only one example of the tax benefits of income properties! If you’d to learn more about investing in residential real estate, check out Mark’s investment courses!

Mark Porter is the Broker/Owner of Castle Hills Real Estate in Lewisville, TX and a Senior CRS Instructor with the Residential Real Estate Council (RRC). The RRC offers two great Residential Investing courses that count towards your CRS Designation:

  • Buying and Selling Income Properties (2-Day)
  • Increase Wealth with Rentals & Other Investment Properties (1-Day)

Mark also offers 1-3 hour sessions that focus on useful Tips for Investors, Landlords and Property Managers! Contact us at (214) 449-1022 or go to for more information on booking Mark Porter for your next CRS class!

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