Depreciation has been the reward that retains on giving for President Donald Trump and his many actual property investments. Now, it seems that on a regular basis American householders might take pleasure in among the identical.
As BiggerPockets has reported, the president has been on a tear not too long ago, providing a deluge of concepts to assist the affordability disaster within the lead-up to the 2026 midterm elections. Amongst his aerosol-spray strategy to brainstorming money-saving methods for householders, he’s turned to at least one that has served him nicely in his personal enterprise. Usually known as a “phantom tax,” depreciation is basically a tax on the put on and tear of the property, calculated over 27.5 years of possession.
Even when the property is maintained in immaculate situation, you’ll be able to nonetheless declare depreciation. The tax break is presently restricted to funding properties. Nevertheless, by floating the notion that owner-occupied householders might additionally profit from the break, the president might doubtlessly save householders a fortune in taxes.
Contemplating many actual property traders additionally personal private residences, it might provide a double whammy of financial savings.
What the President Really Mentioned About Dwelling Depreciation
As President Trump is commonly susceptible to do, his phrases on depreciation fell into the “musing out loud” class quite than any particular proposal, draft laws, or Treasury regulation.
The president was talking on the World Economic Forum in Davos, Switzerland, final month. His precise phrases, in accordance with CNBC and different shops, have been, “The loopy factor is an individual can’t get depreciation on a home, however when a company buys it, they get depreciation.” He added, “OK, right here’s one thing we’re gonna have to consider.”
How Private Dwelling Depreciation Would Work in Sensible Phrases
One of many predominant benefits of proudly owning a rental property is the depreciation it generates, in order that even when a property is breakeven on money circulate, the depreciation might nonetheless make it worthwhile to carry on to if rents and fairness are anticipated to extend.
Depreciation on private property raises some attention-grabbing questions—primarily, wouldn’t it be calculated below the identical pointers as funding properties? Underneath present guidelines, depreciation is calculated on the constructing’s value foundation (buy worth plus sure enhancements, excluding land).
In the end, it could be as much as Congress to use the identical recapture guidelines. Questions on whether or not deductions would section out at sure earnings ranges must be ironed out.
There isn’t a query that depreciation on a private residence could be a major profit to householders, offsetting the taxes they owe. For W-2 earners, it could imply getting a much bigger refund from the IRS, and for actual property traders, it could imply extra deductions they may throw into the kitty.
Briefly, the less taxes the general public has to pay, the more cash they should spend and/or reinvest.
The Depreciation Headache: Home Hacking and Quick-Time period Leases
In the event you rent part of your home, the income-producing space (measured in sq. ft as a share of your house) can be depreciated. For instance, in case you personal a four-unit dwelling and all models are the identical dimension, and you reside in a single, assuming the opposite three models are rented, 75% of your property qualifies for depreciation. The precise equation is:
Adjusted foundation of the property x rental use share = Depreciable worth of rental portion.
Utilizing the instance from REIhub, if a duplex is rented and the proprietor lives in a single unit (50%), and the property’s adjusted foundation is $350,000, the property’s depreciable worth is $175,000.
Depreciable worth of rental portion ÷ 27.5 = Annual depreciation for your own home hack
For the duplex instance, the annual depreciation quantity is $6,363.63.
Nevertheless, points come up in calculating depreciation when particular person rooms are rented, and sure residing areas are shared, making the calculations harder. Quick-term rental websites resembling Airbnb don’t calculate your depreciation for you. That headache ought to be left to an skilled accountant specializing in short-term rentals.
How Bonus Depreciation Matches Into the Equation
Bonus or “accelerated” depreciation has been one of the crucial lauded tax breaks for actual property traders lately, and the president has been a champion of it.
Bonus depreciation is a federal tax incentive that permits companies to deduct a big share of the tools they buy for his or her enterprise within the first 12 months of use, quite than over an extended interval. For actual property traders, this consists of all home equipment and supplies not included within the property’s development (stoves, fridges, cupboards, and so on.). The excellent news this tax 12 months (2025) is that 100% bonus depreciation is back, that means traders can depreciate their tools in a single 12 months quite than spreading it out over a number of years.
It’s unlikely bonus depreciation would play a job within the private dwelling depreciation state of affairs, except part of that house is used for a enterprise—resembling a short- or long-term rental—wherein case, it might provide one other supply of tax financial savings for householders.
Last Ideas
The slew of latest housing concepts by the president, broadly geared towards growing cash flow for on a regular basis Individuals, has arrived like a flash flood in a dry valley creek for one purpose: politics, specifically the 2026 midterm elections.
Whether or not ideas resembling the 50-year mortgage, Fannie Mae and Freddie Mac buying mortgage-backed securities, and a ban on large investors buying single-family homes can have a lot impact on transferring the affordability needle is questionable.
Nevertheless, two of Trump’s most up-to-date matters for dialogue—increasing capital gains exclusions on single-family homes and permitting householders to say depreciation—will have tangible outcomes. Whether or not discuss turns to actuality stays to be seen.
