Trump Floats Homeowner Depreciation Tax Break—Here’s How It Could Work

During an address at the World Economic Forum in Davos, Switzerland, on Wednesday, President Donald Trump suggested considering a change to tax law that would allow homeowners to claim yearly depreciation on their residences – a tax deduction currently largely reserved for corporations. He noted the disparity, stating, “The crazy thing is a person can’t get depreciation on a house, but when a corporation buys it, they get depreciation.”

Understanding Depreciation

Currently, the Internal Revenue Service permits depreciation for business or income-producing rental properties, with some exceptions for business use. Depreciation allows taxpayers to recover the cost of certain property over a set period. This deduction is based on the property’s initial purchase price, any improvements made, and when it was put into service. The annual tax break is also determined by the accounting method used to recover the cost basis.

If a property is sold for a profit, a portion of the previously claimed depreciation may be subject to “depreciation recapture” by the IRS.

Did You Know? President Trump also signed an executive order Tuesday aimed at restricting large institutional investors from buying single-family homes.

Broader Economic Context

This proposal follows other efforts by the President to address housing affordability. The cost of living, encompassing expenses like housing, healthcare, and food, has become a central issue for policymakers. Both Democrats and Republicans are focused on household economic concerns, particularly as Republicans aim to maintain control of the House of Representatives.

Expert Insight: The suggestion to extend depreciation benefits to homeowners signals a potential shift in tax policy focused on individual financial relief, aligning with broader political attention to the rising cost of living and housing affordability.

What Could Happen Next

The feasibility of this proposal remains uncertain. It is currently unclear how such a change might be implemented, and whether it would garner sufficient support in Congress, especially given existing legislative priorities. Congressional backing would be essential for any such policy to move forward.

If pursued, the proposal could face debate regarding its potential impact on the housing market and government revenue. Further discussion and analysis would be needed to assess the potential benefits and drawbacks of extending depreciation to personal residences.

Frequently Asked Questions

What is depreciation?

Depreciation is a yearly income tax deduction that allows taxpayers to recover certain property costs over a set period of time. It is currently permitted for business or income-producing rental property, but generally not for primary residences.

What did President Trump say about depreciation?

President Trump stated that it is “crazy” a person cannot get depreciation on a house, while corporations can. He suggested this is something to consider.

Is this proposal likely to become law?

It is unclear how this idea might come to fruition, and whether the proposal has congressional support amid other legislative priorities.

How might changes to depreciation rules impact the broader housing market?