Depreciation

Depreciation is the decrease in value that an asset does over time. This can be due to age, wear and tear, or bad market conditions. This is the percentage of an asset that was used during a period based on the anticipated life and normal use. Depreciation is claimable as an expense every year for each classification. To calculate it, the standard original basis of the asset will be multiplied by the percentage. This will show the amount of depreciation to expense every year that the asset is held. Using the depreciation of a property as an expense usually can reduce the taxable income of the investment. To calculate a property's current basis, you take the total depreciation subtracted from its original basis. The lower the basis, the higher the taxable income at the sale of the investment property.