SUPERCHARGE YOUR DEPRECIATION DEDUCTIONS

How much extra did you pay in taxes in 2007 not using the component method of depreciation because your accountant did not know about this powerful legal strategy? And, with little risk.

Use the Multi-Component/Land-Residual method. By componetizing you can substantially increase depreciation deductions by first identifying 5-year personal property and 15-year land improvements. Componetizing the depreciation components first is also a way to arrive at a lower, leftover ("residual") land value. With this method, you do not start with the non-depreciable land. Instead, you start with the depreciable components that have the lowest recovery periods and therefore yield the largest depreciation deductions.

The last (or residual) allocation will be towards what's left over -- non-depreciable land. Here you allocate the property cost into four major components in this order: 1. Personal Property, 2. Land Improvements, 3. Building, and 4. Land. (You can also further segment the building into its structural components)

Also read: Importance of Rental Property Depreciation

Don't Miss Tax Deductions On Your Real Estate Investment
from Realty Times, reports that investors should focus on five areas to make sure that they're not losing money when it comes to taxes. The first area involves taking advantage of depreciation deductions. You can either write-off the entire value over 27.5 years or depreciate assets within the property that are short-life depreciation expenses. The short-life method can result in costs being recovered at twice the rate applicable to the real estate property. Only 13% of investors take advantage of this. Next, keep track of your travel to the property - it's a write-off as well. Tax preparation can also be written off. Document improvements versus repairs. Repairs can be expensed. The fifth and final area is casualty and damage to property. Casualty expenses can be written off.