ed, in my view, the rent is what created the $20k, not the depreciation. your depreciation reduces your taxes. it as accounting measure. it is merely expensing over time. as i said, the marginal benefit is the avg tax rate of the income offset by the depreciation amount times the depreciation amount and no more.
the depreciation didn't make you $20k as you imply. w/o the dpreciation you still would've kept $14k (30% tax bracket). the marginal benefit (the only one that matters) is $6k (NOT $20K). oh, and you have to be profitable ;-)
if i make $0 rental income and have $20k depreciation, how much marginal money do i have b/c i have the depreciation vs not having depreciation? $0. why? b/c depreciation offsets income (generated by the rental). depreciation, in and of itself, does not generate any money. it reduces taxes IF AND ONLY IF TAXES ARE DUE.
it is absolutely INACCURATE to say that mu has $1 billion in depreciation and, therefore, now have $1 billion to spend on capexes. that is utter NONSENSE. in fact, mu gets NO BENEFIT WHATSOEVER NOW, even if they had $50 trillion in depreciation, b/c they have no income to offset and reduce their taxes. they may get a tax loss carryforward, but ya gotta make money to eventually take advantage of that. |
