Excess Depreciation and the Maximum Tax*

Gailen L. Hite and Anthony B. Sanders

Real Estate Economics, 1981, vol. 9, issue 2, 134-147

Abstract: The advantages of using an accelerated form of depreciation are significantly reduced for investors with substantial wage incomes. Excess depreciation is treated as a tax preference item under current tax rules which has the effect of imposing significant tax penalties on the high wage income individual who invests in rental property and who qualifies for the maximum tax on personal service income. Under certain circumstances accelerated depreciation methods may be inferior to the straight‐line method. The explanation for this phenomenon lies in the interaction between tax preference income and the maximum tax.

Date: 1981
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