Depreciation

Depreciation is a non-cash tax deduction that lets U.S. real estate investors write off a portion of an investment property's purchase price each year, representing theoretical wear and tear. Residential rental property is depreciated over 27.5 years on a straight-line basis; commercial is 39 years. Only the building value (not land) qualifies.

Depreciation can shelter significant rental income from tax, sometimes producing a paper loss on a profitable property. When you sell, accumulated depreciation is recaptured and taxed, typically at a flat 25% rate — another reason 1031 exchanges are popular among career investors.

Why it matters for Milo customers

Milo's crypto-backed mortgage on a rental property still generates the same depreciation deductions as conventional financing — the loan structure doesn't change the tax treatment of the underlying real estate.

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