# USA Return: Depreciation on Rental Property



## debbie790 (Dec 28, 2010)

Hi,

I own a rental property in Canada. I do NOT claim depreciation on my Canadian tax return because at the time of selling (and if there is capital gain) all claimed depreciation would be considered as income and hence increase my tax bill. Thus, in Canada I have a choice of claiming depreciation. I know by not claiming depreciation I end up paying more tax now on the rental income. Hopefully, in future I will be on a higher income bracket.

Now, for my USA return I claim the same rental property.

My USA accountant told me that irrespective of whether depreciation was claimed on the USA return, IRS ALWAYS considers depreciation as claimed and hence at the time of selling (and if there is a capital gain) all claimed AND unclaimed depreciation will be considered as income, resulting in higher tax bill. 

Please comment.

Thanks
Debbie


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## Bevdeforges (Nov 16, 2007)

The US accountant is correct. On sale of the property, you must calculate the gain based on depreciation "claimed or claimable" (or something like that). Just because you don't claim it doesn't mean it doesn't go toward calculating the gain on the property.

Basically, the strategy in the US is to use the depreciation to run the rental at either break-even or a slight loss while you own the property. Then, when you sell (and have the money to pay the taxes), you "pay the piper" for all those years of 0 or very little tax.
Cheers,
Bev


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