Here is an interesting thing I realized recently as a result of living in the US. In the US property depreciates. As a result you can write off the cost of the depreciation against rental income (typically over 27.5 years).
This deduction is not possible for those living in Europe. Why the difference?
Is it because of differing building standards. Generally more buildings are timber frame in the US verses block build in Europe thereby affecting their lifespan?
There seems to be a belief in the US that buildings are built to last 20-30 years. After that they will need a serious structural review. I personally have a building in Ireland. Its original deeds are going back to the mid 1800’s and it is still standing…. and inhabited for that matter!
Whilst repairs are deductible in Europe you are never allowed a deduction based on the depreciation of the property itself as people don’t tend to think property depreciates.
Here is how it is in the US on the other hand: “Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable.”
We are quite familiar to the idea of depreciation in Europe. It applies to almost everything apart from property.
The idea of being able to write over the capital cost of a property against rental income (even be it over a 27 year period) would make many landlords mouth water but alas I can’t see it happening anytime soon.
The result of this in the US is that many people (particularly the high earners with excessive income) in the US try to ensure they have a property or two on tow so that they can make use of the valuable tax write-offs.
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