Prospective Changes in Tax Law and the Value of Depreciable Real Estate

The Economic Recovery Tax Act of 1981 significantly reduced the taxation of income‐producing properties by accelerating tax depreciation on both new and, especially, existing properties. A partial reversal of the 1981 legislation appears likely. To provide some insight into the possible effects of a decrease in tax depreciation of income‐producing properties, two potential tax changes are analyzed: an increase from fifteen to twenty years in the tax service lives of both new and existing properties and an increase for existing properties only. Both residential and commercial/industrial properties are considered.