How the Depreciation of Commercial Property is calculated?

Answer 1

Residential real estate is generally depreciated over 27.5 years, in equal amounts each year except the first year and last year.

Nonresidential real estate is generally depreciated over 39 years, in equal amounts each year except the first year and last year.

The amount depreciated is the basis of the buildings, not the land.

Answer 2

Commercial Building Depreciation

Answer 3

Commercial Real Estate Depreciation

Answer 4

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How the Depreciation of Commercial Property is calculated?

Answer 5

The accountants have to determine a reasonable lifetime for the building. Often they then use straight-line depreciation, where they take the full cost of the building, divide by the number of years of productive life of the asset, then depreciate that fraction every year.

They can also do an accelerated depreciation where the building is depreciated rapidly at first and then slower later on.

There's a lot of managerial discretion in this. According to GAAP they have to be reasonable estimations of productive lifespan and you're supposed to try to match period costs with period revenues, but it's really easy to fudge this kind of stuff to make your books look good.

Answer 6

For Federal income tax purposes, commercial real estate (buildings only, never land) is depreciated on a 40 year lifetime.