---
title: "Depreciation — What It Means | Ondo RE"
canonical: https://www.ondorealestate.com/glossary/depreciation/
---

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Investing[All terms starting with D](/glossary/#letter-D)

# Depreciation

A tax deduction that lets an owner write off the cost of a rental building over a set recovery period.

Depreciation spreads the building’s cost, not the land’s, across a recovery period defined in the tax code, producing a paper expense that reduces taxable rental income without a cash outlay.

It is generally recaptured when the property is sold. Depreciation is also commonly added back when a lender calculates qualifying income from rentals, because it did not actually cost you cash.

## Why it matters

This is tax treatment, and it depends on your circumstances. Confirm the specifics with a qualified tax professional.

## Related terms

- [NOI (Net Operating Income)Income after operating expenses but before debt service, taxes on income, and capital expenditures.](/glossary/noi/)
- [Cash flowWhat remains each month after rent has covered operating expenses and debt service.](/glossary/cash-flow/)
- [1031 exchangeA tax provision allowing capital gains deferral when investment property is exchanged for other like-kind investment property.](/glossary/1031-exchange/)
- [Self-employed incomeIncome from self-employment, generally qualified on net figures after business deductions rather than gross receipts.](/glossary/self-employed-income/)

## Go deeper

- [Depreciation add-back on Schedule E](/blog/depreciation-add-back-schedule-e/)

## More in Investing

- [1% rule](/glossary/one-percent-rule/)
- [1031 exchange](/glossary/1031-exchange/)
- [50% rule](/glossary/fifty-percent-rule/)
- [Appreciation](/glossary/appreciation/)
- [CAGR (Compound Annual Growth Rate)](/glossary/cagr/)
- [Cap rate (Capitalization rate)](/glossary/cap-rate/)

## Have a question about your own situation?

Ondo handles brokerage, lending, property management and notary under one roof, so the answer does not change depending on who you ask.

[Talk to Ondo](/contact/)[Browse all terms](/glossary/)