Depreciation
Decline in the value of a house due to wear and tear, obsolescence, adverse changes in the neighborhood, or any other reason. Depreciation is treated as an expense and is a line item on an income statement.
Depreciation can only be applied to the building and not the land, since land does not wear out over time. Residential income property must be depreciated over a 27.5 year period using straight line depreciation. Commercial income property must be depreciated over 39 years using straight line depreciation. Straight line depreciation stipulates that an asset must be depreciated by equal amounts each year over its useful life.
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