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Depreciation & Amortization in Real Estate Accounting

This presentation by Exo Edge covers the essential concepts of Depreciation & Amortization in real estate accounting. It explains depreciation as the systematic allocation of tangible asset costs over time and amortization as the gradual expensing of intangible assets.

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Depreciation & Amortization in Real Estate Accounting

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  1. Depreciation & Amortization in Real Estate Accounting Presented by Exo Edge

  2. Introduction to Depreciation & Amortization • Depreciation: The systematic allocation of the cost of a tangible asset over its useful life. • Amortization: The gradual expensing of intangible assets over time. • Why it matters: Helps property managers and investors allocate costs effectively, reduce tax liabilities, and maintain accurate financial records.

  3. Depreciation in Real Estate • Common depreciable real estate assets: • Buildings & structures (excluding land) • Property improvements (e.g., landscaping, lighting) • Depreciation Methods: • Straight-Line Method: Equal expense allocation over asset life. • Declining Balance Method: Higher expenses in earlier years. • IRS Guidelines: Residential rental property depreciates over 27.5 years, commercial property over 39 years.

  4. Amortization in Real Estate • Applied to intangible assets like: • Leasehold improvements • Loan fees & financing costs • Goodwill & trademarks (if applicable) • Typically follows straight-line amortization over the asset’s useful life. • Helps in financial planning and tax deductions.

  5. Key Takeaways & Impact • Depreciation & amortization help in tax savings and cost allocation. • Understanding IRS regulations is crucial for compliance. • Proper accounting ensures accurate financial reporting and investment decisions. • Leverage technology & accounting software for efficient tracking.

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