Tax Facts

Information to help individuals and small business navigate our complex Tax Laws. Not to be construed as tax advice. Contact your hired tax advisor for your specific tax situation and advice.

Property That's Not Eligible for Depreciation

Rules apply (of course!) when you want to deduct long-term assets in a business and on your business tax return. If it's property - real property, personal property, or otherwise - you can only depreciate or expense the cost of purchasing that property if it's used in your business and if it wears out or gets used up over time.

So, for example, if you have a rental property and it's a single-family house on land, you can only deduct (and in this case it becomes a depreciation deduction) the house portion of what you purchased and not the land. Land does not wear out. (There are exceptions to this when you are purchasing land specifically for oil drilling - then you have a deduction each year for the depletion of that oil in the land. But that's a different and special case.)

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