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Then what's the point of depreciating if you have to "pay it back" later? You save now but pay that the only (spurious) "benefit"?

It depends on your tax bracket. For example, if you are realizing paper losses on a rental via depreciation, and can offset ordinary income with those losses during your high income years, say 25% tax bracket, but then sell the place when you are retired and are paying 15%, then you have a tax savings.

Phil, if one has a vacation rental or other real estate investment that is subject to depreciation, and the property gets passed down to children on death, does the depreciation slate get wiped clean with the basis adjustment, or is that just for non-investment property?

not hoping to use this info any time soon ;-)
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