Residential Rental Property

Residential Rental Property

Writing assignment. Prepare a memo to your client explaining the tax rules regarding purchasing a beach home in gulf shores alabama.

WRITING ASSIGNMENT – DUE DAY OF FINAL AT BEGINNING OF CLASS
Your Client (make up a Name) is thinking about purchasing a beach home in Gulf Shores,
Alabama. They plan on using the home during the summer but want to rent it out the rest of the
year. Prepare a memo to your Client explaining the tax rules regarding this decision.
Memo Requirements:
Your Name
Client Name
Address
Re: Vacation Home
No More than 2 Pages
Times New Roman Font – 12 point
1.15 line spacing

Contents
Reminders ………………. 1
Introduction ……………… 2
Chapter 1. Rental Income and
Expenses (If No Personal Use
of Dwelling) …………… 2
Rental Income ………….. 2
Rental Expenses …………. 3
Chapter 2. Depreciation of Rental
Property …………….. 5
The Basics ……………. 6
Special Depreciation Allowance …. 8
MACRS Depreciation ………. 8
Claiming the Correct Amount of
Depreciation ………… 12
Chapter 3. Reporting Rental
Income, Expenses, and
Losses …………….. 12
Which Forms To Use ……… 12
Limits on Rental Losses …….. 13
At-Risk Rules ……….. 13
Passive Activity Limits …… 13
Casualties and Thefts ……… 14
Example …………….. 14
Chapter 4. Special Situations …… 15
Condominiums …………. 15
Cooperatives ………….. 15
Property Changed to Rental
Use …………….. 15
Renting Part of Property …….. 16
Not Rented for Profit ………. 16
Example—Property Changed to
Rental Use …………. 17
Chapter 5. Personal Use of
Dwelling Unit (Including
Vacation Home) ………… 17
Dividing Expenses ……….. 17
Dwelling Unit Used as a Home …. 18
Reporting Income and
Deductions …………. 19
Worksheet 5-1. Worksheet for
Figuring Rental Deductions
for a Dwelling Unit Used as a
Home ……………. 20
Chapter 6. How To Get Tax Help …. 21
Index ………………… 23
Future Developments
For the latest information about developments
related to Publication 527, such as legislation
enacted after it was published, go to
www.irs.gov/pub527.
Reminders
Net Investment Income Tax (NIIT). You may
be subject to the Net Investment Income Tax
(NIIT). NIIT is a 3.8% tax on the lesser of net
Department
of the
Treasury
Internal
Revenue
Service
Publication 527
Cat. No. 15052W
Residential
Rental
Property
(Including Rental of
Vacation Homes)
For use in preparing
2014 Returns
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Jan 16, 2015
investment income or the excess of modified
adjusted gross income (MAGI) over the threshold
amount. Net investment income may include
rental income and other income from passive
activities. Use Form 8960, Net Investment
Income Tax, to figure this tax. For more information
on NIIT, go to IRS.gov and enter “Net Investment
Income Tax” in the search box.
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Revenue Service is a proud partner with the
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Photographs of missing children selected
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pages that would otherwise be blank. You can
help bring these children home by looking at the
photographs and calling 1-800-THE-LOST
(1-800-843-5678) if you recognize a child.
Introduction
Do you own a second house that you rent out
all the time? Do you own a vacation home that
you rent out when you or your family isn’t using
it?
These are two common types of residential
rental activities discussed in this publication. In
most cases, all rental income must be reported
on your tax return, but there are differences in
the expenses you are allowed to deduct and in
the way the rental activity is reported on your return.
Chapter 1 discusses rental-for-profit activity
in which there is no personal use of the property.
It examines some common types of rental
income and when each is reported, as well as
some common types of expenses and which
are deductible.
Chapter 2 discusses depreciation as it applies
to your rental real estate activity—what
property can be depreciated and how much it
can be depreciated.
Chapter 3 covers the reporting of your rental
income and deductions, including casualties
and thefts, limitations on losses, and claiming
the correct amount of depreciation.
Chapter 4 discusses special rental situations.
These include condominiums, cooperatives,
property changed to rental use, renting
only part of your property, and a not-for-profit
rental activity.
Chapter 5 discusses the rules for rental income
and expenses when there is also personal
use of the dwelling unit, such as a vacation
home.
Finally, chapter 6 explains how to get tax
help from the IRS.
Sale or exchange of rental property. For information
on how to figure and report any gain
or loss from the sale, exchange or other disposition
of your rental property, see Publication
544, Sales and Other Dispositions of Assets.
Sale of main home used as rental property.
For information on how to figure and report
any gain or loss from the sale or other disposition
of your main home that you also used
as rental property, see Publication 523, Selling
Your Home.
Tax­free exchange of rental property occasionally
used for personal purposes. If
you meet certain qualifying use standards, you
may qualify for a tax-free exchange (a like-kind
or section 1031 exchange) of one piece of
rental property you own for a similar piece of
rental property, even if you have used the rental
property for personal purposes.
For information on the qualifying use standards,
see Rev. Proc. 2008–16, 2008 IRB 547, at
http://www.irs.gov/irb/2008-10_IRB/ar12.html.
For more information on like-kind exchanges,
see chapter 1 of Publication 544.
Comments and suggestions. We welcome
your comments about this publication and your
suggestions for future editions.
You can send us comments from
www.irs.gov/formspubs. Click on “More Information”
and then on “Give us feedback.”
Or you can write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone.
Therefore, it would be helpful if you would include
your daytime phone number, including
the area code, in your correspondence.
Although we cannot respond individually to
each comment received, we do appreciate your
feedback and will consider your comments as
we revise our tax products.
Ordering forms and publications. Visit
www.irs.gov/formspubs to download forms and
publications. Otherwise, you can go to
www.irs.gov/orderforms to order forms or call
1-800-829-3676 to order current and prior-year
forms and instructions. Your order should arrive
within 10 business days.
Tax questions. If you have a tax question,
check the information available on IRS.gov or
call 1-800-829-1040. We cannot answer tax
questions sent to the above address.
Useful Items
You may want to see:
Publication
Travel, Entertainment, Gift, and Car
Expenses
Selling Your Home
Depreciating Property Placed in
Service Before 1987
Business Expenses
Sales and Other Dispositions of
Assets
Casualties, Disasters, and Thefts
Basis of Assets
Passive Activity and At-Risk Rules
How To Depreciate Property
Form (and Instructions)
Depreciation and Amortization
Election To Postpone Determination
as To Whether the Presumption
Applies That an Activity Is Engaged
in for Profit
463
523
534
535
544
547
551
925
946
4562
5213
Passive Activity Loss Limitations
Supplemental
Income and Loss
1.
Rental Income
and Expenses (If
No Personal Use
of Dwelling)
This chapter discusses the various types of
rental income and expenses for a residential
rental activity with no personal use of the dwelling.
Generally, each year you will report all income
and deduct all out-of-pocket expenses in
full. The deduction to recover the cost of your
rental property—depreciation—is taken over a
prescribed number of years, and is discussed in
chapter 2, Depreciation of Rental Property.
If your rental income is from property
you also use personally or rent to
someone at less than a fair rental
price, first read chapter 5, Personal Use of
Dwelling Unit (Including Vacation Home).
Rental Income
In most cases, you must include in your gross
income all amounts you receive as rent. Rental
income is any payment you receive for the use
or occupation of property. It is not limited to
amounts you receive as normal rental payments.
When To Report
When you report rental income on your tax return
generally depends on whether you are a
cash or an accrual basis taxpayer. Most individual
taxpayers use the cash method.
Cash method. You are a cash basis taxpayer
if you report income on your return in the year
you actually or constructively receive it, regardless
of when it was earned. You constructively
receive income when it is made available to
you, for example, by being credited to your
bank account.
Accrual method. If you are an accrual basis
taxpayer, you generally report income when
you earn it, rather than when you receive it. You
generally deduct your expenses when you incur
them, rather than when you pay them.
More information. See Publication 538, Accounting
Periods and Methods, for more
8582
Schedule E (Form 1040)
CAUTION
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Page 2 Chapter 1 Rental Income and Expenses (If No Personal Use of Dwelling)
information about when you constructively receive
income and accrual methods of accounting.
Types of Income
The following are common types of rental income.
Advance rent. Advance rent is any amount
you receive before the period that it covers. Include
advance rent in your rental income in the
year you receive it regardless of the period covered
or the method of accounting you use.
Example. On March 18, 2014, you signed
a 10-year lease to rent your property. During
2014, you received $9,600 for the first year’s
rent and $9,600 as rent for the last year of the
lease. You must include $19,200 in your rental
income in 2014.
Canceling a lease. If your tenant pays you to
cancel a lease, the amount you receive is rent.
Include the payment in your rental income in the
year you receive it regardless of your method of
accounting.
Expenses paid by tenant. If your tenant pays
any of your expenses, those payments are
rental income. Because you must include this
amount in income, you can also deduct the expenses
if they are deductible rental expenses.
For more information, see Rental Expenses,
later.
Example 1. Your tenant pays the water and
sewage bill for your rental property and deducts
the amount from the normal rent payment. Under
the terms of the lease, your tenant does not
have to pay this bill. Include the utility bill paid
by the tenant and any amount received as a
rent payment in your rental income. You can deduct
the utility payment made by your tenant as
a rental expense.
Example 2. While you are out of town, the
furnace in your rental property stops working.
Your tenant pays for the necessary repairs and
deducts the repair bill from the rent payment. Include
the repair bill paid by the tenant and any
amount received as a rent payment in your
rental income. You can deduct the repair payment
made by your tenant as a rental expense.
Property or services. If you receive property
or services as rent, instead of money, include
the fair market value of the property or services
in your rental income.
If the services are provided at an agreed
upon or specified price, that price is the fair
market value unless there is evidence to the
contrary.
Example. Your tenant is a house painter.
He offers to paint your rental property instead of
paying 2 months rent. You accept his offer.
Include in your rental income the amount the
tenant would have paid for 2 months rent. You
can deduct that same amount as a rental expense
for painting your property.
Security deposits. Do not include a security
deposit in your income when you receive it if
you plan to return it to your tenant at the end of
the lease. But if you keep part or all of the security
deposit during any year because your
tenant does not live up to the terms of the lease,
include the amount you keep in your income in
that year.
If an amount called a security deposit is to
be used as a final payment of rent, it is advance
rent. Include it in your income when you receive
it.
Other Sources of Rental Income
Lease with option to buy. If the rental agreement
gives your tenant the right to buy your
rental property, the payments you receive under
the agreement are generally rental income. If
your tenant exercises the right to buy the property,
the payments you receive for the period after
the date of sale are considered part of the
selling price.
Part interest. If you own a part interest in
rental property, you must report your part of the
rental income from the property.
Rental of property also used as your home.
If you rent property that you also use as your
home and you rent it less than 15 days during
the tax year, do not include the rent you receive
in your income and do not deduct rental expenses.
However, you can deduct on Schedule A
(Form 1040), Itemized Deductions, the interest,
taxes, and casualty and theft losses that are allowed
for nonrental property. See chapter 5,
Personal Use of Dwelling Unit (Including Vacation
Home).
Rental Expenses
In most cases, the expenses of renting your
property, such as maintenance, insurance,
taxes, and interest, can be deducted from your
rental income.
Personal use of rental property. If you
sometimes use your rental property for personal
purposes, you must divide your expenses between
rental and personal use. Also, your rental
expense deductions may be limited. See chapter
5, Personal Use of Dwelling Unit (Including
Vacation Home).
Part interest. If you own a part interest in
rental property, you can deduct expenses you
paid according to your percentage of ownership.
Example. Roger owns a one-half undivided
interest in a rental house. Last year he paid
$968 for necessary repairs on the property.
Roger can deduct $484 (50% × $968) as a
rental expense. He is entitled to reimbursement
for the remaining half from the co-owner.
When To Deduct
You generally deduct your rental expenses in
the year you pay them.
If you use the accrual method, see Publication
538 for more information.
Types of Expenses
Listed below are the most common rental expenses.
Advertising.
Auto and travel expenses.
Cleaning and maintenance.
Commissions.
Depreciation.
Insurance.
Interest (other).
Legal and other professional fees.
Local transportation expenses.
Management fees.
Mortgage interest paid to banks, etc.
Points.
Rental payments.
Repairs.
Taxes.
Utilities.
Some of these expenses, as well as other less
common ones, are discussed below.
Depreciation. Depreciation is a capital expense.
It is the mechanism for recovering your
cost in an income producing property and must
be taken over the expected life of the property.
You can begin to depreciate rental property
when it is ready and available for rent. See
Placed in Service under When Does Depreciation
Begin and End in chapter 2.
Insurance premiums paid in advance. If you
pay an insurance premium for more than one
year in advance, you cannot deduct the total
premium in the year you pay it. For each year of
coverage, you can deduct only the part of the
premium payment that applies to that year. See
chapter 6 of Publication 535 for information on
deductible premiums.
Interest expense. You can deduct mortgage
interest you pay on your rental property. When
you refinance a rental property for more than
the previous outstanding balance, the portion of
the interest allocable to loan proceeds not related
to rental use generally cannot be deducted
as a rental expense. Chapter 4 of Publication
535 explains mortgage interest in detail.
Expenses paid to obtain a mortgage.
Certain expenses you pay to obtain a mortgage
on your rental property cannot be deducted as
interest. These expenses, which include mortgage
commissions, abstract fees, and recording
fees, are capital expenses that are part of
your basis in the property.
Form 1098, Mortgage Interest Statement.
If you paid $600 or more of mortgage interest
on your rental property to any one person,
you should receive a Form 1098 or similar
statement showing the interest you paid for the
year. If you and at least one other person (other
than your spouse if you file a joint return) were
liable for, and paid interest on, the mortgage,
and the other person received the Form 1098,
report your share of the interest on Schedule E
(Form 1040), line 13. Attach a statement to your
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Chapter 1 Rental Income and Expenses (If No Personal Use of Dwelling) Page 3
return showing the name and address of the
other person. On the dotted line next to line 13,
enter “See attached.”
Legal and other professional fees. You can
deduct, as a rental expense, legal and other
professional expenses such as tax return preparation
fees you paid to prepare Schedule E,
Part I. For example, on your 2014 Schedule E
you can deduct fees paid in 2014 to prepare
Part I of your 2013 Schedule E. You can also
deduct, as a rental expense, any expense
(other than federal taxes and penalties) you
paid to resolve a tax underpayment related to
your rental activities.
Local benefit taxes. In most cases, you cannot
deduct charges for local benefits that increase
the value of your property, such as
charges for putting in streets, sidewalks, or water
and sewer systems. These charges are nondepreciable
capital expenditures and must be
added to the basis of your property. However,
you can deduct local benefit taxes that are for
maintaining, repairing, or paying interest
charges for the benefits.
Local transportation expenses. You may be
able to deduct your ordinary and necessary local
transportation expenses if you incur them to
collect rental income or to manage, conserve,
or maintain your rental property. However,
transportation expenses incurred to travel between
your home and a rental property generally
constitute nondeductible commuting costs
unless you use your home as your principal
place of business. See Publication 587, Business
Use of Your Home, for information on determining
if your home office qualifies as a principal
place of business.
Generally, if you use your personal car,
pickup truck, or light van for rental activities, you
can deduct the expenses using one of two
methods: actual expenses or the standard mileage
rate. For 2014, the standard mileage rate
for business use is 56 cents per mile. For more
information, see chapter 4 of Publication 463.
To deduct car expenses under either
method, you must keep records that
follow the rules in chapter 5 of Publication
463. In addition, you must complete Form
4562, Part V, and attach it to your tax return.
Pre-rental expenses. You can deduct your ordinary
and necessary expenses for managing,
conserving, or maintaining rental property from
the time you make it available for rent.
Rental of equipment. You can deduct the rent
you pay for equipment that you use for rental
purposes. However, in some cases, lease contracts
are actually purchase contracts. If so, you
cannot deduct these payments. You can recover
the cost of purchased equipment through
depreciation.
Rental of property. You can deduct the rent
you pay for property that you use for rental purposes.
If you buy a leasehold for rental purposes,
you can deduct an equal part of the cost
each year over the term of the lease.
RECORDS
Travel expenses. You can deduct the ordinary
and necessary expenses of traveling away
from home if the primary purpose of the trip is to
collect rental income or to manage, conserve,
or maintain your rental property. You must properly
allocate your expenses between rental and
nonrental activities. You cannot deduct the cost
of traveling away from home if the primary purpose
of the trip is to improve the property. The
cost of improvements is recovered by taking
depreciation. For information on travel expenses,
see chapter 1 of Publication 463.
To deduct travel expenses, you must
keep records that follow the rules in
chapter 5 of Publication 463.
Uncollected rent. If you are a cash basis taxpayer,
do not deduct uncollected rent. Because
you have not included it in your income, it is not
deductible.
If you use an accrual method, report income
when you earn it. If you are unable to collect the
rent, you may be able to deduct it as a business
bad debt. See chapter 10 of Publication 535 for
more information about business bad debts.
Vacant rental property. If you hold property
for rental purposes, you may be able to deduct
your ordinary and necessary expenses (including
depreciation) for managing, conserving, or
maintaining the property while the property is
vacant. However, you cannot deduct any loss of
rental income for the period the property is vacant.
Vacant while listed for sale. If you sell
property you held for rental purposes, you can
deduct the ordinary and necessary expenses
for managing, conserving, or maintaining the
property until it is sold. If the property is not held
out and available for rent while listed for sale,
the expenses are not deductible rental expenses.
Points
The term “points” is often used to describe
some of the charges paid, or treated as paid, by
a borrower to take out a loan or a mortgage.
These charges are also called loan origination
fees, maximum loan charges, or premium
charges. Any of these charges (points) that are
solely for the use of money are interest. Because
points are prepaid interest, you generally
cannot deduct the full amount in the year paid,
but must deduct the interest over the term of the
loan.
The method used to figure the amount of
points you can deduct each year follows the
original issue discount (OID) rules. In this case,
points are equivalent to OID, which is the difference
between:
The amount borrowed (redemption price at
maturity, or principal) and
The proceeds (issue price).
The first step is to determine whether your
total OID (which you may have on bonds or
other investments in addition to the mortgage
loan), including the OID resulting from the
points, is insignificant or de minimis. If the OID
RECORDS
is not de minimis, you must use the constant-yield
method to figure how much you can
deduct.
De minimis OID. The OID is de minimis if it is
less than one-fourth of 1% (.0025) of the stated
redemption price at maturity (principal amount
of the loan) multiplied by the number of full
years from the date of original issue to maturity
(term of the loan).
If the OID is de minimis, you can choose one
of the following ways to figure the amount of
points you can deduct each year.
On a constant-yield basis over the term of
the loan.
On a straight line basis over the term of the
loan.
In proportion to stated interest payments.
In its entirety at maturity of the loan.
You make this choice by deducting the OID
(points) in a manner consistent with the method
chosen on your timely filed tax return for the tax
year in which the loan is issued.
Example. Carol took out a $100,000 mortgage
loan on January 1, 2014, to buy a house
she will use as a rental during 2014. The loan is
to be repaid over 30 years. During 2014, Carol
paid $10,000 of mortgage interest (stated interest)
to the lender. When the loan was made,
she paid $1,500 in points to the lender. The
points reduced the principal amount of the loan
from $100,000 to $98,500, resulting in $1,500
of OID. Carol determines that the points (OID)
she paid are de minimis based on the following
computation.
Redemption price at maturity (principal
amount of the loan) …………… $100,000
Multiplied by: The term of the
loan in complete years ………… × 30
Multiplied by ………………… × .0025
De minimis amount …………
$  7,500
The points (OID) she paid ($1,500) are less
than the de minimis amount ($7,500). Therefore,
Carol has de minimis OID and she can
choose one of the four ways discussed earlier
to figure the amount she can deduct each year.
Under the straight line method, she can deduct
$50 each year for 30 years.
Constant-yield method. If the OID is not de
minimis, you must use the constant-yield
method to figure how much you can deduct
each year.
You figure your deduction for the first year in
the following manner.
1. Determine the issue price of the loan. If
you paid points on the loan, the issue price
generally is the difference between the
principal and the points.
2. Multiply the result in (1) by the yield to maturity
(defined later).
3. Subtract any qualified stated interest payments
(defined later) from the result in (2).
This is the OID you can deduct in the first
year.
Yield to maturity (YTM). This rate is generally
shown in the literature you receive from
your lender. If you do not have this information,
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Page 4 Chapter 1 Rental Income and Expenses (If No Personal Use of Dwelling)
consult your lender or tax advisor. In general,
the YTM is the discount rate that, when used in
computing the present value of all principal and
interest payments, produces an amount equal
to the principal amount of the loan.
Qualified stated interest (QSI). In general,
this is the stated interest that is unconditionally
payable in cash or property (other than
another loan of the issuer) at least annually over
the term of the loan at a fixed rate.
Example—Year 1. The facts are the same
as in the previous example. The yield to maturity
on Carol’s loan is 10.2467%, compounded
annually.
She figured the amount of points (OID) she
could deduct in 2014 as follows.
Principal amount of the loan ………. $100,000
Minus: Points (OID) ……………. – 1,500
Issue price of the loan ………….. $ 98,500
Multiplied by: YTM ……………. × .102467
Total …………………….. 10,093
Minus: QSI …………………. – 10,000
Points (OID) deductible in 2014 ….
$     93
To figure your deduction in any subsequent
year, you start with the adjusted issue price. To
get the adjusted issue price, add to the issue
price figured in Year 1 any OID previously deducted.
Then follow steps (2) and (3), earlier.
Example—Year 2. Carol figured the deduction
for 2015 as follows.
Issue price …………………. $98,500
Plus: Points (OID) deducted
in 2014 …………………..
+ 93
Adjusted issue price …………… $98,593
Multiplied by: YTM ……………. × .102467
Total …………………….. 10,103
Minus: QSI …………………. – 10,000
Points (OID) deductible in 2015 ….
$ 103
Loan or mortgage ends. If your loan or mortgage
ends, you may be able to deduct any remaining
points (OID) in the tax year in which the
loan or mortgage ends. A loan or mortgage may
end due to a refinancing, prepayment, foreclosure,
or similar event. However, if the refinancing
is with the same lender, the remaining
points (OID) generally are not deductible in the
year in which the refinancing occurs, but may
be deductible over the term of the new mortgage
or loan.
Points when loan refinance is more than
the previous outstanding balance. When
you refinance a rental property for more than
the previous outstanding balance, the portion of
the points allocable to loan proceeds not related
to rental use generally cannot be deducted
as a rental expense.
Example. Charles refinanced a loan with a
balance of $100,000. The amount of the new
loan was $120,000. Charles used the additional
$20,000 to purchase a car. The points allocable
to the $20,000 would be treated as nondeductible
personal interest.
Repairs and Improvements
Generally, an expense for repairing or maintaining
your rental property may be deducted if you
are not required to capitalize the expense.
Improvements. You must capitalize any expense
you pay to improve your rental property.
An expense is for an improvement if it results in
a betterment to your property, restores your
property, or adapts your property to a new or
different use. Table 1-1 shows examples of
many improvements.
Betterments. Expenses that may result in
a betterment to your property include expenses
for fixing a pre-existing defect or condition, enlarging
or expanding your property, or increasing
the capacity, strength, or quality of your
property.
Restoration. Expenses that may be for restoration
include expenses for replacing a substantial
structural part of your property, repairing
damage to your property after you properly adjusted
the basis of your property as a result of a
casualty loss, or rebuilding your property to a
like-new condition.
Adaptation. Expenses that may be for
adaptation include expenses for altering your
property to a use that is not consistent with the
intended ordinary use of your property when
you began renting the property.
Separate the costs of repairs and improvements,
and keep accurate records.
You will need to know the cost
of improvements when you sell or depreciate
your property.
The expenses you capitalize for improving
your property can generally be depreciated as if
the improvement were separate property.
RECORDS
2.
Depreciation of
Rental Property
You recover the cost of income producing property
through yearly tax deductions. You do this
by depreciating the property; that is, by deducting
some of the cost each year on your tax return.
Three factors determine how much depreciation
you can deduct each year: (1) your basis in the
property, (2) the recovery period for the property,
and (3) the depreciation method used. You
cannot simply deduct your mortgage or principal
payments, or the cost of furniture, fixtures,
and equipment, as an expense.
You can deduct depreciation only on the part of
your property used for rental purposes. Depreciation
reduces your basis for figuring gain or
loss on a later sale or exchange.
You may have to use Form 4562 to figure and
report your depreciation. See Which Forms To
Use in chapter 3. Also see Publication 946.
Section 179 deduction. The section 179 deduction
is a means of recovering part or all of
the cost of certain qualifying property in the year
you place the property in service. This deduction
is not allowed for property used in connection
with residential rental property. See chapter
2 of Publication 946.
Alternative minimum tax (AMT). If you use
accelerated depreciation, you may be subject to
the AMT. Accelerated depreciation allows you
to deduct more depreciation earlier in the recovery
period than you could deduct using a
straight line method (same deduction each
year).
The prescribed depreciation methods for
rental real estate are not accelerated, so the depreciation
deduction is not adjusted for the
AMT. However, accelerated methods are generally
used for other property connected with
Examples of Improvements
Additions
Bedroom
Bathroom
Deck
Garage
Porch
Patio
Lawn & Grounds
Landscaping
Driveway
Walkway
Fence
Retaining wall
Sprinkler system
Swimming pool
Miscellaneous
Storm windows, doors
New roof

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