Depreciation & Amortization in Real Estate Accounting
This presentation by Exo Edge covers the essential concepts of Depreciation & Amortization in real estate accounting. It explains depreciation as the systematic allocation of tangible asset costs over time and amortization as the gradual expensing of
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Presentation Transcript
Depreciation & Amortization in Real Estate Accounting Presented by Exo Edge
Introduction to Depreciation & Amortization Depreciation: The systematic allocation of the cost of a tangible asset over its useful life. Amortization: The gradual expensing of intangible assets over time. Why it matters: Helps property managers and investors allocate costs effectively, reduce tax liabilities, and maintain accurate financial records.
Depreciation in Real Estate Common depreciable real estate assets: Buildings & structures (excluding land) Property improvements (e.g., landscaping, lighting) Depreciation Methods: Straight-Line Method: Equal expense allocation over asset life. Declining Balance Method: Higher expenses in earlier years. IRS Guidelines: Residential rental property depreciates over 27.5 years, commercial property over 39 years.
Amortization in Real Estate Applied to intangible assets like: Leasehold improvements Loan fees & financing costs Goodwill & trademarks (if applicable) Typically follows straight-line amortization over the asset s useful life. Helps in financial planning and tax deductions.
Key Takeaways & Impact Depreciation & amortization help in tax savings and cost allocation. Understanding IRS regulations is crucial for compliance. Proper accounting ensures accurate financial reporting and investment decisions. Leverage technology & accounting software for efficient tracking.
