Depreciation is real estate’s most powerful tax benefit. The IRS lets you deduct a portion of a residential property’s value every year over 27.5 years — even while the property is appreciating. On a $300,000 property (where $240,000 is building value), that’s ~$8,727/year in non-cash deductions. This “phantom loss” offsets your rental income on paper, meaning you can earn positive cash flow while reporting little or no taxable income. Combined with a cost segregation study (which reclassifies building components into 5, 7, or 15-year depreciation) and the restored 100% bonus depreciation, you can dramatically accelerate these deductions in the early years.