You can immediately charge against rental income whatever you spend on repairs, but not the cost of major improvements like a furnace. That outlay can only be amortized, depreciated and deducted bit by bit over its expected life. A similar tax treatment allows you to claim, each year, a portion of the original cost of the building as a depreciation "expense" against rental income.

If you choose not to do that, you don't gain anything. You lose. When you sell the place, your taxable profit is by depreciation you claimed – or could have claimed – over the years.

Depreciation is a great tax dodge. Tax you postpone can be paid in the future with cheaper dollars, and you have the tax savings to invest in the meantime. Then eventually, if you die and leave the place to your kids, all past depreciation and capital gain is wiped out. Under today's tax laws, death is the ultimate tax shelter.