Mile High Home Group – Welcome to Denver

Depreciation in real estate is a tax deduction that lets owners write off the property’s wear and tear over 27.5 years for residential rentals, shielding about 3.6% of the building’s cost basis annually from income taxes—turning paper losses into real savings for Denver real estate investors in the Colorado housing market.

How Depreciation Works

After 15+ years in Denver real estate and thousands of transactions, I explain it straight: you allocate purchase price—land doesn’t depreciate, but improvements like the house (say 80% of $600K) get straight-line deducted yearly. A $480K basis means $17,455 annual write-off on Schedule E, offsetting rental income even if cash flows positive. Recapture hits at sale (25% tax on deducted amounts), but 1031 exchanges defer it. Cost segregation accelerates by breaking out fixtures (5-15 years), boosting early deductions 2-3x. Repairs don’t qualify—only structural decline does. Audits scrutinize basis; keep appraisals handy.

It compounds with leverage.

Denver-Specific Depreciation Plays

Highlands Ranch real estate maximizes deductions near Mountain Vista schools, where HOAs cover exteriors but basis includes interiors—$700K villages yield $20K+ yearly shields amid Douglas County stability through market cycles. Littleton bungalows in LPS zones flex basement finishes for segregated assets, lighter covenants easing $550K basis splits sans heavy reserves. Core Denver urban rehabs like LoHi command premium allocations for kitchens, offsetting higher insurance via faster 15-year personal property. Winters slow flips; springs enable post-reno refis. Compared to Littleton simplicity, Highlands Ranch trades HOA offsets for school-boosted values.

Appraisals lock accurate splits.

Practical Advice for Buyers and Sellers

Asset Class	Life	Annual Deduct ($600K Basis)
Building	27.5 years	$21K
Appliances	5 years	+$5K seg
Carpets	5 years	+$3K seg

Buyers, order cost seg studies Day 1—target rehabs for acceleration, negotiate allocations in contracts. Sellers to rentals, disclose basis history—1031 prep with depreciation schedules.

My hands-on, concierge-level service engineers depreciation strategies block-by-block, weighs school/HOA fits through market cycles, builds pricing from local sales, and negotiates relentlessly for tax-optimized buys. Clients are long-term relationships and friends, not transactions—integrity, honesty, transparency, and relentless work ethic unlock hidden savings.

If depreciation puzzles your Denver real estate rentals—Littleton, Highlands Ranch breakdowns—reach out anytime. I’m here for a no-pressure conversation and honest guidance tailored to the Colorado housing market.