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  • Welcome to Lofty's FAQ đź‘‹
  • FAQ
    • What is Lofty?
    • How does the Lofty Marketplace work?
    • Which payment methods can tokens be purchased with?
    • Can non-US citizens participate?
    • Can I sell my tokens anytime?
    • How does Lofty make money?
    • How do taxes work?
    • How does governance work?
    • How are repairs handled?
    • How often do I receive rental income?
    • How do I withdraw my rental income?
    • Do I benefit from depreciation?
    • Will I lose my tokens if Lofty AI goes out of business?
    • As an owner am I liable if any lawsuits / accidents occur at the property?
    • Who manages the properties?
    • What is your Property Manager's process and tenant selection criteria?
    • Are Lofty properties purchased using debt?
    • Who owns the properties that are being listed on your platform?
    • How long after I pay will I receive tokens in my Algorand wallet?
    • Does the price of Algorand affect the price of Lofty tokens?
    • What is an Algorand wallet’? Why do I need one?
    • Which blockchain is Lofty AI using to tokenize properties?
    • How many tokens can I purchase in each property?
    • Can I do a 1031 Exchange with Lofty properties?
    • Who legally has ownership of these properties?
    • How is token appreciation determined over time?
    • How do we ensure each LLC owns the deed on its property?
    • Do I have to submit my ID before I can participate?
    • Why do I need to fill in personal information, and is it encrypted?
    • Why is my ID verification taking so long?
    • How can I track the performance of my property?
    • How long are properties held before they're sold?
    • Do you have 2 Factor Authentication (2FA) available?
    • What happens if a property doesn't sell fully by the deadline on the website?
  • Glossary
    • IRR
    • Cash on Cash return (CoC)
    • Cap rate
    • Appreciation
    • Net Operating Income (NOI)
    • Diversification
    • Operating Expenses
    • CapEx
    • Single-Family
    • Duplex
    • Triplex
    • Quadplex/Fourplex
    • Capital Gains Tax
    • Closing costs
    • MLS
    • HVAC
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  1. FAQ

Do I benefit from depreciation?

Yes.

Our accountants use the MACRS method for depreciation purposes and each property will be depreciated over 27.5 years. This means that even though you might be earning income from rents as well as appreciation (on paper, because the property value has gone up), the value of the property is actually reducing on paper for tax purposes.

This can sound confusing and counter intuitive, but it is one of the main advantages of owning and investing in real estate in the U.S.

If you’ve made $100 in income from rents, but the property on paper depreciated (for tax purposes only) by $1000 and you owned 10% of the holding entity, then you would actually benefit from a paper loss of $100, which would negate your rental earnings completely.

As a result, even though you’ve physically received $100 for the year, you actually incur $0 in nominal income tax liability for that year through ownership in the property.

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Last updated 3 years ago