Condominium landlords record a variety of expenses in order to claim them on their taxes, reducing the amount they owe. They also calculate depreciation — a figure that represents the decline in value on the condominium — which often provides a tax deduction, as well.
List all of the costs involved with acquiring the condominium. These include the purchase price, legal fees and any renovation expenses necessary to make the condominium livable. Add these costs together. This is your total value of the property.
Find the useful life of the condominium. The IRS maintains a table of this info ("MACRS recovery periods") for rental properties. (See Resources.) Locate this table on the IRS website and find "residential rental property". Look in the General Depreciation System to find the current recovery period, or useful life, of the condominium.
Calculate the depreciation percentage. The IRS also maintains a table of the percentages to use for calculating the depreciation of the condominium. On the table, locate number of years for which you’ve owned the condominium and the month when you began renting the property. Find the percentage where these two intersect. This is the depreciation percentage rate to use.
Multiply the depreciation percentage by the value of the condominium. This is the amount of depreciation to enter on your taxes for the rental condominium.
- In the year that you acquire the property, you must use the mid-month convention. Under this convention, you calculate the depreciation assuming you acquired the property at the middle of the month that you began renting the property. This only applies to the first year and is built into the rates listed on the table.