[anyonebutedmonton]

Originally Posted by Azure

My problem specifically has to do with the way that real estate is taxed.

If you spend $10 million of your own money on real estate, you can take a small deduction on that property and depreciate it for 27 years. So basically $370,000 per year for 27 years straight.

Say your get $500,000 per year from your tenets, and $200,000 of that is allocated towards the cost of running the building and covering your yearly expenses. It means you have $300,000 left over. You simply deduct against the $370,000 each year, and show a $70,000 loss which allows you to avoid paying income taxes, but in reality your cash flow is fine and your asset value goes up each year.

Say the average growth rate of real estate is between 3-5% pear year, so after 10 years your asset has appreciated in value between 30-50%, so now that $10 million is now worth $15 million, and you sell your property you only worry about capital gains tax.

To me that seems massively unfair, and it is exactly what Trump and other large real estate holders are doing. I don't get why you should be able to depreciate against an asset that actually increases in value each year.

Same reason all the billionares are buying up massive amounts of land, farms and ranches. They can effectively reduce their tax exposure to radically low numbers because of the amounts you can depreciate and write off each year. Especially with land and the massive land taxes being owed.

You don’t get to depreciate on the entire $10M. There is a division between the land and the building.


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