We hear so much about home values rising, but do houses depreciate as well? The truth is that they do, but not in the way most people think. It’s a confusing topic for many homeowners because historically, home values always tend to rise. Depreciation is something that’s most commonly associated with how the IRS views rental properties.
The IRS expects a rental property’s value to decline over a 27.5-year period, so it grants a property owner certain benefits when it comes to filing their taxes. The IRS does this by permitting a rental property owner the ability to offset their property depreciation via an allowance for depreciation losses.
Causes of Home Value Depreciation
The IRS allows for depreciation losses via “exhaustion and wear and tear (including obsolescence) of a property.” The IRS recognizes house value depreciation from the moment the owner places the rental property in service. From that point, the property owner is allowed to recover some or all of their original purchase cost, and the cost of any home improvements made.
This is done by filing Form 4562, Depreciation and Amortization. The form can be filed starting in the year the rental property is placed in service, and any year when improvements are made or furnishings added.
Do Houses Depreciate on the Market?
While the IRS recognizes home value depreciation, the truth about home values is that they don’t always decline in value on the actual housing market. Barring any special circumstances, a homeowner can almost always expect the market value of their home to rise. In this regard, it is possible for a rental property owner to claim depreciation while at the same time seeing the market value of their home increase.
Want to Improve Your Home’s Market Value Quicker? Call Thompson Creek Today
One of the best ways to improve the market value of a home is to have certain improvements made, such as replacing the windows, installing a new roof, and replacing the siding. At Thompson Creek, we have been providing our customers with impeccable products and services for about 40 years. When you choose Thompson Creek as your contractor, you get the finest materials and workmanship installed on your home.
We can help increase your home’s market value. Want to learn more? Just call the experts at Thompson Creek and get a free estimate for your home improvement projects today.
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Thank you for pointing out that you should keep doors closed during your window replacement. My husband and I are needing to replace our bedroom window and need to find the best company to replace them. I’ll have to do some research and find the best window company.