The Real Financial Impact of Understanding Publication 946
- Rick Ruberg
- Dec 19, 2025
- 8 min read
Because I Find IRS Publications Difficult to Read.
TLDR:
Don't just read and highlight. Reading and highlighting is a poor strategy because it fails to give you a framework before you start and it makes you guess what's important when you don't know enough to make that judgment.
Use a reading strategy. Good reading strategies prompt you to think about what you need to learn before you start, help you pose specific questions to answer, and force you to connect ideas as you read.
Take notes in your own words. Take notes to stay mentally engaged and create a useful reference, but write in your own words and focus on answering the questions you posed before reading.
Schedule serious time. Reading tax publications is hard work; schedule enough time to give it serious attention because the financial payoff makes it worth the effort.
If you own investment real estate or you own a tax practice, you probably know that IRS Publication 946 is important. It's the rulebook for depreciation, one of the most powerful tax benefits available to property owners.
But let’s be honest, 100+ pages of dense tax code, it's almost unreadable.
Publication 946 wasn’t written to be a page-turner. It was written to be comprehensive and legally precise, which means it's packed with technical language, exceptions, and qualifications that are mind numbing.
But there's a reason Publication 946 is hard to get through. Just read these two sentences from the publication...
"Section 179 allows you to deduct the full cost of qualifying property in the year you place it in service. However, Section 179 is limited by your taxable business income."
Most readers would think they understood both sentences. But did you catch how the second sentence fundamentally changes the meaning of the first?
Many readers miss these kinds of connections. Research shows that people are very likely to notice when they don't understand a single word or when grammar is wrong. But they're much less likely to notice when one sentence qualifies, limits, or even contradicts another sentence they just read.
This is why simply reading Publication 946 from beginning to end (even carefully) won't necessarily help you understand depreciation.
Tax publications are structured hierarchically, with general rules stated first and then qualified by exceptions, special cases, and limitations that appear pages later. Your brain naturally wants to read the way you read stories:
A causes B, which causes C. But tax code doesn't work that way.
Let me show you what to do instead.
When Reading IRS Publications
You don't want to miss the connections between rules that appear pages apart.
What your brain will do: It will read the way you read for pleasure, trusting that if you understand each sentence, you're doing fine. | How to outsmart your brain: Use specialized strategies that force you to connect the pieces and understand how different provisions work together. |
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TIP 1 - Don't Do What Most People Do: Read and Highlight
Here's what most people do when they open Publication 946: they start reading from page one. When something seems important, they highlight it in yellow. They figure this will help them remember the information and create a study guide for later.
This doesn't solve, your tendency to understand sentences individually without connecting them.
How can you be sure you're highlighting the most important information if you're missing half the qualifications and limitations?
Even if you understand everything, how can you judge what's most important when you're reading about depreciation rules for the first time?
You don't know enough about the topic yet to make that judgment.
Research backs this up. When researchers took a look at used textbooks from college bookstores, they discovered that students highlighted completely different sections. If identifying key content were straightforward, everyone would be marking the same passages. But they don’t.
Please note: I'm not saying never highlight. Highlighting works fine if you already know the topic well.
If you're a tax professional who's used cost segregation studies for 15 years and you're reviewing Publication 946 for updates, your deep knowledge means you'll understand what you're reading and you'll be a good judge of what matters.
So highlighting isn't the only problem with the "just read and highlight" approach. "Just read" is also a mistake, because you shouldn't dive into Publication 946 without preparation.
TIP 2 - Use a Reading Strategy That Fits Your Goal
With Publication 946, you can't just open to page one and start reading. You need to bring something to the process rather than passively waiting for the IRS to make tax law interesting (spoiler: they won't).
The key to effective reading is to tackle a specific task as you go through the material. Here’s a handy framework, inspired by educational research, that’s particularly useful for tax publications:
Survey:
Skim the publication first. Look at the table of contents, section headings, and any tables or charts. Get a rough idea of what's covered. This is how you'll discover, for example, that Chapter 4 covers MACRS depreciation methods and that Table B-1 lists recovery periods for different property types.
Question:
Before you dig in, pose questions you expect the reading to answer. If you own rental property, your questions might include: "What's the recovery period for my rental house?" "Can I use Section 179 on property improvements?" "How does bonus depreciation interact with MACRS?"
Read:
Now read with purpose. You're not just absorbing information, you're actively looking for answers to your specific questions. This keeps you mentally engaged and helps you connect related concepts that appear in different sections.
Summarize:
After each major section, stop and summarize what you learned in your own words. Could you explain it to another investor? This step is crucial because it reveals gaps in your understanding. If you can't explain it, you didn't really understand it.
Review:
Revisit the material, especially the sections that answered your key questions. Make note of how different provisions interact, like how the Section 179 income limitation affects your ability to expense property improvements.
This approach works because it addresses the core problem: it encourages you to create connections across sections rather than just grasping individual sentences. When you read with questions in mind, you’re on the lookout for links. You’re much more likely to catch when page 47 clarifies a rule mentioned on page 23.
The Summarize step is especially powerful because people fool themselves into thinking they understand when they don't. Trying to explain what you just read (even to yourself) quickly reveals whether you really grasped it.
One practical tip: place sticky notes at the end of each major section before you start reading. They'll remind you to stop, summarize, and check whether you've answered any of your questions.
If this framework seems like overkill, here's a simpler alternative: Ask "Why?" as you read.
When Publication 946 states that "residential rental property is depreciated over 27.5 years," ask yourself "Why 27.5 years? Why not 25 or 30?" This doesn't mean you need to find the answer (though you might). Asking "Why?" forces you to think about deeper principles and connections instead of just collecting facts.
TIP 3 - Take Notes as You Read
Most people don't take notes when reading IRS publications. They figure highlighting serves the same purpose. But we've already established why that doesn't work.
Taking notes actually serves two really important purposes: it keeps your brain engaged (you can't just breeze through the text), and those notes will come in handy later when you're chatting with your tax advisor or getting your return ready.
How should you start? The same way you prep for reading: by writing down your questions. What do you need to know about depreciation? Write those questions at the top of your notes so you keep them front of mind.
If Publication 946 has clear section headings (it does), use those as your outline.
Under each heading, write:
A summary in your own words (not just copying the IRS language)
About three additional statements that might include:
An important limitation or exception
How this section relates to your specific situation
How it answers one of your original questions
An example that clarifies the concept
For instance, under "MACRS Depreciation Periods":
Summary: "Residential rental houses depreciate over 27.5 years, commercial buildings over 39 years"
But property inside the building may qualify for much shorter periods
This is why cost segregation studies work, they identify components with 5, 7, or 15-year lives
Example: Carpet and appliances are 5-year property, not 27.5-year
Use your own words whenever possible, not the IRS's language. You're not taking dictation. The act of translating tax language into plain English forces you to actually understand it.
As you take notes, think ahead to how you'll use them. If you're planning to hire a cost segregation provider, you'll want notes on what makes a study defensible (hint: certified engineers). If you're preparing to discuss depreciation strategies with your CPA, you'll want notes on how Section 179, bonus depreciation, and MACRS work together.
When you finish reading, review your notes immediately. Did you answer your original questions? Are they clear enough that if you set them aside for two weeks, you could still understand them? Would they help you have an informed conversation with your tax advisor?
Next, try to link what you learned from Publication 946 to other resources. If your tax advisor brought up accelerated depreciation during your last discussion, how does that connect to what you just discovered about MACRS? And if you’ve come across cost segregation, how does the guidance in Publication 946 regarding property classifications back that up?
TIP 4 - Allocate Serious Time to This
Let's be honest, reading IRS publications is not enjoyable. So if reading Publication 946 makes you feel overwhelmed, you're not alone.
Most tasks carry immediate consequences if you skip them. Forget to file your quarterly estimated taxes? The IRS notices right away. But the cost of not understanding depreciation rules is less obvious, which is why people don't take the time to read publications like this.
Some real estate investing guides even suggest shortcuts. Let me address two common ones:
Speed reading doesn't work for tax publications.
You literally cannot read IRS tax code at 1,000 words per minute and understand it. Decades of research confirm that speed reading is really just skimming, and if you skim unfamiliar, complex material like tax law, you won't understand it. Period.
Don't rely solely on summaries or quick-reference guides.
Yes, Publication 946 includes tables and examples that help. But using them as a replacement for reading the actual guidance is risky. You'll miss important qualifications, limitations, and exceptions that could cost you thousands in lost deductions or, worse, audit problems.
I understand that sometimes life happens and you need to skim. But planning to skip detailed reading of tax guidance that directly affects your wealth is, frankly, a bad financial decision.
How much time should you allocate? That depends on your situation. If you're a real estate investor with multiple properties exploring cost segregation for the first time, plan to spend several hours with Publication 946 over a few sessions.
Don't try to digest it all at once, tax guidance is too dense for that.
If you already understand the basics and you're reading to understand a specific topic (like Partial Asset Disposition elections), you might spend 30-60 minutes focused on that section.
Proper depreciation planning can generate tens or hundreds of thousands of dollars in tax savings over the life of your properties. Isn't that worth a few focused hours of learning?
Using Your Depreciation Knowledge of Publication 946
Understanding IRS Publication 946 is the foundation for making smart depreciation decisions that can dramatically reduce your tax liability.
When you understand how MACRS works, you'll recognize why cost segregation studies deliver such powerful results. When you understand Section 179 limitations, you'll know when to apply it and when bonus depreciation makes more sense. When you understand property classifications and recovery periods, you'll be able to have informed conversations with tax professionals instead of just nodding along.
Most importantly, you'll be able to evaluate whether the advice you're getting makes sense. You'll know what questions to ask. You'll understand when someone is oversimplifying or, worse, steering you wrong.
Reading Publication 946 carefully (using the strategies I've outlined) isn't easy. But it's a skill for successful real estate investing. The depreciation deductions you claim will be based on the rules in this publication.
Your brain doesn't come with a user's manual for understanding IRS publications. But now you have some guidance.
Stay informed. Stay strategic. Stay ahead.
✌️ out. -Rick
Rick operates 100BonusDepreciation.com, which focuses on depreciation strategies for property owners. If you want to connect directly, send him a message on X
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