Depreciation cost ( Genka shokyaku hi = 減価償却費 ) of used real estate

Though, I have explained about depreciation cost, now I will explain about depreciation cost ( Genka shokyaku hi = 減価償却費 )of used real estate in Japan.

🙁  In the case a real estate has completed its statutory durable years ( useful life, Taiyo nensu = 法定耐用年数 )

Modified durable years ( Mitsumori taiyo nensu = 見積り耐用年数 ) =  statutory durable years × 0.2

Example
You buy wooden real estate for renting out.
It was built in 1980.
Assumed today is 2016.
Statutory Durable years of  wooden house is  22 years.
So, this real estate has used up its Statutory Durable years.
But, you can still add up depreciation cost for 4 years.
22 years × 0.2 = 4.4 years
In the case of calculation of durable years of commercial real estate ( Including real estate for rental ), fraction of less  than 1 year shall be cut off.

😳  In the case a real estate has completed its part of statutory durable years ( useful life, Taiyo nensu = 法定耐用年数 )

Modified durable years ( Mitsumori taiyo nensu = 見積り耐用年数 ) =  statutory durable years – elapsed years + ( elapsed years × 0.2)

Example
You buy reinforced concrete apartment for renting out.
Price for building is 5,155,731 yen.
It was built in September, 1990.
You buy this apartment in December, 2013.
Statutory durable years of reinforced concrete apartment  is 47 years ( = 564months ).
Elapsed years are from September, 1990 to December, 2013 = 22 years + 4 months + 12 months = 280 months.

So, modified durable years is
564months – 280 months + ( 280 months ×0.2 ) = 284 months + 56 months = 340 months = 28.3333 years.
In the case of calculation of durable years of commercial real estate ( Including real estate for rental ), fraction of less  than 1 year shall be cut off.
So, modified durable years are 28 years.

Now, you can find that modified durable years of this apartment is 28 years.
Depreciation rate is different from durable years .

Depreciation rate is like this.
depreciation rate of real estate in Japan

depreciation rate excerpt

depreciation rate excerpt

Depreciation rate correspond to modified durable years of 28 years  is 0.036.

You buy this apartment in December, 2013 at 5,155,731 yen.

The amount of depreciation cost = acquisition price × depreciation rate × operating months ÷12 months.

The amount you write at tax filing paper as undepreciated balance =acquisition price -total of depreciation cost.

Depreciation cost in 2013 : 5,155,731 yen × 0.036 × 1 month ÷ 12 months=15,468 yen

So, undepreciated balance ( 未償却残高 = Misho kyaku zandaka ) in 2013 : 5,155,731 yen –  15,468 yen = 5,140,263 yen.

Depreciation cost in 2014 is 5,155,731 yen × 0.036=185,607 yen
Undepreciated balance in 2014 is 5,140,263 yen – 185,607 yen = 4,954,656 yen

Depreciation cost in 2015 is 5,155,731 yen × 0.036=185,607 yen
Undepreciated balance in 2015 is 4,954,656 yen – 185,607 yen = 4,769,049 yen
Depreciation cost in 2016 is 5,155,731 yen × 0.036=185,607 yen
Undepreciated balance in 2016 is 4,769,049 yen – 185,607 yen = 4,583,442 yen
….
Repetition
……
…..
Undepreciated balance in 2040 is 128,874 yen.
The annual amount of depreciation cost ( 185,607 yen ) is higher than the amount of Undepreciated balance in 2040.( 128,874 yen ).

In this case, depreciation cost is 128,874 yen -1 yen =128,873 yen.
So, Undepreciated balance in 2041 is 128,874 yen – 128,873 yen = 1 yen.

Now, depreciation process of this real estate is finished.

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