Under what circumstance can an owner of a single-family residence depreciate the property for tax purposes?

The ability to depreciate a single-family residence for tax purposes primarily applies when the property is used as a rental. In the context of real estate, depreciation is an accounting method that allows property owners to allocate the cost of the property over its useful life. For residential rental property, the IRS allows owners to depreciate the property over 27.5 years, provided it generates rental income.

When a property is rented out, it is considered a business asset generating revenue, which justifies the depreciation deduction against the rental income. This is beneficial for owners, as it reduces their taxable income from the rental property, thus lowering their overall tax liability.

In contrast, a home that is owner-occupied does not qualify for depreciation because it is not generating rental income and is considered a personal asset. While a property may have some potential for tax benefits upon its sale or through capital gains, depreciation specifically requires the base of generating rental income. Holding the property for a designated time period does not inherently enable depreciation, as the use of the property—specifically for renting—is what triggers this tax benefit.