Correct Depreciation Schedule Is 27.5 Years

QUESTION: I own a six-unit apartment building. A friend told me I can maximize my income tax depreciation deduction by depreciating each component, such as the roof, foundation, carpets, structure, plumbing and wiring separately over their useful lives which are much shorter than the 27.5 years I’m using. Is this true?

ANSWER: No. Your friend is about five years behind the times. The 1986 Tax Reform Act abolished component depreciation unless the property was placed in service before that date.

You are correctly depreciating your building over 27.5 years on a straight-line basis.

Commercial properties must be depreciated over 31.5 years.

Easement: You Use It or Lose It

Q: Years ago we bought some rural property as an investment. We never use it. But recently I was in the vicinity and found our easement road to the highway across an adjoining property blocked off.

Our property has other access from a dirt road, but the easement road was much better. What can we do about this?

A: Use your easement or lose it. Depending on the law of the state where your property is located, the neighbor may be able to eliminate your easement by what is called adverse use, blocking off your easement for a prescribed number of years. Please consult a real estate attorney.