Depreciation Schedule Example

An example is provided to outline how much difference a tax depreciation schedule can make in an individuals life. It assumes that the savings made from the schedule are contributed to their current loan repayment scheme as extra repayments.

For example, William earns $100,000 a year in wages plus another $35,000 in rental income from his two investment properties. Williams’ total mortgage to the bank is $500,000 and has a 30 year period of repayment.

Tax Depreciation improves cash flow:

Not Claiming Depreciation

 

Gross Wages

$100,000

 

Gross Rental Incorme

$35,000

 

Rental Loss

$37,500

 

Taxable Income

$97,500

 

Tax Payable

$26,850

Loan Details

  Loan Amount  $500,000

  Interest Rate  7%

  Loan Term  30 Years

  Repayment Frequency  Weekly

Payment Details

  Extra Contribution Per Payment  $182 from Savings

  Extra Contribution Stars After  0 Years

 

By obtaining a depreciation schedule William is able to reduce his taxable income by a further $24,000 resulting in a saving of $9,450 yearly saving or $182 per week.

 

By depositing his weekly tax savings of $182 into his current loan repayment scheme, he could significantly reduce his loan term and save thousands of dollars in interest.

Claiming Depreciation

 

Gross Wages

$100,000

 

Gross Rental Incorme

$35,000

 

Rental Loss

$37,500

 

Taxable Income

$97,500

 

Tax Payable

$26,850

 

Total Saved

 

$9,450 (Per Year)
$  182 (Per Week)

This results in a huge saving both in time within the loan and the overall dollar amount. By depositing the savings made from the schedule into Williams’ current repayment scheme (not changing anything else), he was able to save $323,688.28 and reduce the loan length by 12 years and 3 months.