Home investors are said to be concerned that the depreciation deductions exceed mortgage amortization. This is because the depreciation remains flat but the amount of amortization rises, albeit slowly, over time, so the tax benefit of owning a piece of property fades away.

My question is, how does depreciation deduction work in residential mortgages on a conceptual level? So home is considered as a capital, so it depreciates over time (27.5 years, mil rate, depreciable base, etc). So does this mean, for the portion that depreciates each year, I am paying a lower property tax set by the government and for the remaining portion considered "undepreciated", I pay a normal property tax rate?

An example with explanation would be helpful.

  • Tax questions need a country tag. Where are you? Commented Nov 23, 2019 at 23:04
  • 1
    You know, depreciation (in US) applies to rental properties, not owner occupied. Commented Nov 24, 2019 at 0:45
  • We do need to know where you are, because laws differ. And you can take depreciation on the part of a home used for business. See Part III of Form 8829. But AFAIK this depreciation amount has nothing to do with the mortgage, it's based on the purchase price (or fair market value) minus the value of the land.
    – jamesqf
    Commented Nov 24, 2019 at 2:50

1 Answer 1


How does depreciation deduction work in mortgages?

Generally - not at all? Why should it?

Depreciation is a tax element based on purchase price. Mortgage is a credit based on outstanding balance.

Depreciation generally works like that: you have a loss from the loss of value of the home that is tax deductible (i.e. deducted from your income so you are taxed with a lower fictional income).

There is NO correlation to mortgage at all.

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