Amy invested $650,000 in real estate ($487,500 for an office building and $162,500 for its land). The property enjoys full occupancy; tenants include an assortment of businesses. Amy can deduct $12,500 in depreciation from her taxes. By the end of her first year of ownership, Amy earned $97,500 in rental income. If she pays income taxes at the rate of 25%, then she will save in taxes by taking the depreciation deduction.

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To calculate the tax savings from the depreciation deduction we need to determine the tax... View the full answer