Skip to main content
All CollectionsHow Taxes Work With Lofty
Token Holders Benefit From Depreciation
Token Holders Benefit From Depreciation

Learn how you benefit from depreciation and how it is calculated.

Max Ball avatar
Written by Max Ball
Updated over a week ago

Lofty token holders benefit from depreciation.

Our accountants use the MACRS method for depreciation purposes and each property will be depreciated over 27.5 years. This means that even though you might be earning income from rents as well as appreciation (on paper, because the property value has gone up), the value of the property is actually reducing on paper for tax purposes.

This may sound confusing and counter-intuitive, but it is one of the main advantages of owning and investing in real estate in the U.S.

If you’ve made $100 in income from rents, but the property on paper depreciated (for tax purposes only) by $1000 and you owned 10% of the holding entity, then you would actually benefit from a paper loss of $100, which would negate your rental earnings completely.

As a result, even though you’ve physically received $100 for the year, you actually incur $0 in nominal income tax liability for that year through ownership in the property.

Did this answer your question?