Reference

Glossary

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Adjusted basis: Original basis plus improvements, minus depreciation claimed.
Amortization: Deducting a non-physical cost, such as loan fees, a little each year.
Amount realized: The sale price minus selling costs, used to compute gain.
Assessed value: The county's valuation, often used to split land from building.
Bonus depreciation: A first-year write-off of qualifying short-life property.
Business use percentage: The share of vehicle or asset use that is business, which sets the deduction.
Capital improvement: Spending that betters, restores, or adapts property, added to basis.
Capitalize: To add a cost to basis instead of deducting it immediately.
Carryover basis: The giver's basis, inherited by the recipient of a gifted property.
Component depreciation: Writing off parts of a building on their own shorter schedules.
Conversion to rental: Turning a personal home into a rental, which sets a new depreciable basis.
Cost basis: What a property counts as costing you for tax purposes.
Cost segregation: An engineering study that reclassifies parts of a building to shorter lives.
Depreciable basis: The building portion of basis, the part that can be written off.
Depreciation recapture: Tax at up to 25 percent on the gain attributable to depreciation claimed.
Fair market value: What a willing buyer and seller would agree to, with neither compelled.
Land allocation: The share of a purchase assigned to land, which cannot be depreciated.
Lease inclusion amount: A small add-back that keeps luxury vehicle lessees in line with owners.
Mileage log: A contemporaneous record of date, miles, and purpose for each trip.
Placed in service: The date a property is ready and available for rent, starting depreciation.
Points: Loan fees charged up front, amortized over the loan term on a rental.
Recovery period: The number of years over which the law spreads an asset's cost.
Repair: Work that keeps property operating, deducted in the year it is paid.
Safe harbor: A rule allowing certain small costs to be expensed without argument.
Section 179: An election to expense certain business property immediately, with limits.
Stepped-up basis: Basis reset to market value when property passes at death.
Straight-line depreciation: Equal annual deductions across an asset's recovery period.
Unrecaptured section 1250 gain: The depreciation-driven slice of real estate gain taxed up to 25 percent.
Useful life: The period the tax law assumes an asset will last: 27.5 or 39 years for buildings.