Many in Congress are talking tax reform (which is not likely until after this year’s election). Illinois REALTORS® are on Capitol Hill this week discussing the importance of the Mortgage Interest Deduction, the deduction for property taxes, as well as the “like-kind exchange” provision. Another set of tax provisions that is very important to the real estate industry is the depreciation schedule.
NAR recently released a study on the economic value of depreciation provisions of the federal tax code. This study was done with the Massachusetts Institute of Technology and other real estate groups. The study finds that depreciation accounts for $700 billion in economic activity each year; that’s 4 percent of the national gross domestic product.
Current depreciation schedules are: 23 years for residential properties, 39 years for non-residential properties and 15 years for leasehold improvements.
Any effort in Congress to extend these schedules or limit the amount of depreciation will be strongly opposed by NAR and Illinois REALTORS®.