Depreciation
Direct definition
A decline in a property's value, or an accounting deduction that spreads a building's cost over its useful life.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
Depreciation has two meanings: a market drop in value, and a tax concept letting rental owners deduct a portion of the building's cost each year.
Why it matters
For investors, depreciation is a meaningful tax shelter even as the property may appreciate in market value.
Where you may see it
- Property income statement
- Tax documents
A real-world example
A residential rental building with a $275,000 depreciable basis produces $10,000/year in depreciation deductions over 27.5 years.
Educational and illustrative only
A common misunderstanding
Depreciation as a tax deduction doesn't mean the property is actually losing market value — the two concepts are unrelated.
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This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026