John purchases residential rental property on June 30, 2015 for a cost of $290,000. Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land. What is John's maximum depreciation deduction for 2015?

Question

Quizplus · Accepted Answer

The maximum depreciation deduction for residential rental property is $2,500 per year. Since John purchased the property on June 30, 2015, he is only entitled to a half-year's worth of depreciation for 2015, which is $2,500 / 2 = $1,250. However, since the cost of the land is not depreciable, John's maximum depreciation deduction for 2015 is $1,250 x $140,000 / $290,000 = $2,758.

John Purchases Residential Rental Property on June 30, 2015 for a Cost