Depreciation
de·pre·ci·a·tion
/dəˌprēSHēˈāSH(ə)n/
is commonly known as a reduction in the value of an asset with the passage of time.
In accounting Depreciation is an accounting process by which a company allocates an asset’s cost throughout its useful life. In other words, it records how the value of an asset declines over time.
Depreciation is the process used to deduct the costs of buying and improving a rental property. Rather than taking one large deduction in the year you purchase (or improve) the property, depreciation distributes the deduction across the useful life of the property. The Internal Revenue Service (IRS) has very specific rules regarding depreciation, and if you own rental property, it’s important to understand how the process works.