Physical things – including buildings – deteriorate over time. This loss in value is called “depreciation.” A landlord is allowed to consider this loss a cost of doing business and deduct a certain portion of this loss from his income every year. This will reduce his taxable income. And this will reduce the amount of federal and state income taxes he pays.
As an accounting method, it is the allocation of the cost of a tangible asset over its useful life. Businesses normally choose to depreciate long-term assets to obtain a more immediate tax benefit.
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