Housing Assistance: An Inventory of Fiscal Year 2010 Programs, Tax Expenditures, and Other Activities

U.S. Government Accountability Office

Accelerated depreciation on rental housing

Administering Agency/Entity Internal Revenue Service
Short Description Allows owners of rental housing to deduct depreciation expenses at a more accelerated rate (over 27.5 years) than normally permitted (over 40 years). The amount of depreciation that a taxpayer can deduct for both property improvements and the cost of rental property depends on the taxpayerís basis in the property, among other factors. A taxpayerís basis in a rental property is generally the cost of the property when it was acquired, excluding the cost of land. If the taxpayer is subject to the alternative minimum tax and the rental housing is placed in service after 1998, depreciation also is determined using the 27.5-year period. If the taxpayer is subject to the alternative minimum tax and the rental housing is placed in service after 1986 and before 1999, then depreciation reverts to a 40-year write-off period.
Primary Purpose Assistance for rental property owners
Type of Housing Supported Rental housing
Type of Assistance Deferral of tax
Estimated Revenue Loss1 -$1,490,000,000; tax expenditure revenue loss estimates are generally reported in the Presidentís budget on a cash basis. When incoming tax receipts from past deferrals are greater than deferred receipts from new activity, the cash-basis tax expenditure estimate can be negative. For certain tax expenditures that take the form of deferrals of tax liability, the Presidentís budget also presents estimates made on a present value basis. The Presidentís budget for fiscal year 2012 reported that the estimated present value of revenue losses for activities undertaken in calendar year 2010 for this tax expenditure would be $6,570,000,000.

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