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Rental-Property Profits, 2nd Edition by Michael C. Thomsett

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8.

HANDLING DEPRECIATION FOR RENTAL PROPERTIES

You are allowed to deduct expenses each year that pertain to your real estate investment activity. By definition, deductible expenses include interest, property taxes, utilities, legal and accounting fees, auto expenses, and any other items relating to managing and maintaining your property. As an investor, you also purchase capital assets and are entitled to deduct those costs as well; however, they cannot be deducted in a single year. They have to be depreciated over a specified number of years, called a recovery period.

The distinction between expenses and capital assets is an easy one to make. ...

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