“Why You Should Be Calculating Tax-Equivalent Yield,” October 2023

The ability to shelter cash flows from taxes is often cited as one of the greatest benefits of investing in real estate. Despite this popular perception, real estate tax shelters are often poorly understood. Even if investors do understand the functioning of a tax shelter, they may not have a clear idea of how to assess the benefit that it provides.

The following article offers an overview of one of the most valuable tax shelters in real estate – depreciation – and describes how investors can assess the value provided by depreciation through the use of a tax-equivalent yield.