During a busy and eventful appearance last week at the World Economic Forum in Davos, Switzerland, President Donald Trump floated the idea of allowing depreciation — an income tax deduction to recover certain property costs over a set period of time — for personal residences.
“The crazy thing is a person can’t get depreciation on a house, but when a corporation buys it, they get depreciation,” Trump said during an address in Davos. “Okay, here’s something we’re gonna have to think about.”
Trump’s comments follow other housing affordability efforts, including an executive order signed last week to ban large institutional investors from buying single-family homes. CNBC said the cost of living has become a key theme among policymakers as many Americans struggle to pay for housing, healthcare, food, and other living expenses.
Focus on Affordability
Both parties are focused on household economic issues as Republicans seek to defend a very thin House majority during a mid-term election in November.
CNBC reported that it’s unclear how Trump’s depreciation idea might come to fruition, and whether it has congressional support amid other legislative priorities.
Under current U.S. law, depreciation is allowed for business or income-producing rental property, but generally not for primary residences, with exceptions for business use, CNBC said.
The depreciation deduction is based on a property’s “basis,” or up-front purchase price plus improvements, and when it was “placed in service.” The annual tax break also depends on the accounting method used that outlines how many years the owner has to recover the cost basis, CNBC said.
Should the property later sell at a profit, the Internal Revenue Service recoups some of the deduction claimed, known as “depreciation recapture.”
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