In calculating depreciation on both my rental apartment building and its furniture, what depreciation type, asset class, depreciation method, and recovery period should be used?
Since the rental apartment building is residential rental property, the building is generally depreciated over a recovery period of 27.5 years using the straight line method of depreciation and a mid-month convention. Because the furniture is used in a residential rental real estate activity and is not typically used in an office, the furniture is included in asset class 57.0, Distributive Trades and Services, of Revenue Procedure 87-56. As a result, the furniture is generally depreciated over a recovery period of 5 years using the 200% declining balance method of depreciation and a half-year convention. If your property is located within the New York Liberty Zone, you may be eligible for a special depreciation allowance if the property meets certain conditions. For more information see Chapter 3, Claiming the Special Depreciation Allowance, in Publication 946, How to depreciate Property.
