Rental Property Depreciation Calculator
Work out your depreciable basis, the yearly deduction on the IRS 27.5-year schedule, and the full MACRS table from the month you placed the rental in service.
Depreciation schedule
| Recovery year | Tax year | Depreciation | Remaining basis |
|---|---|---|---|
| 1 | 2026 | $4,347 | $256,453 |
| 2 | 2027 | $9,484 | $246,970 |
| 3 | 2028 | $9,484 | $237,486 |
| 4 | 2029 | $9,484 | $228,002 |
| 5 | 2030 | $9,484 | $218,519 |
| 6 | 2031 | $9,484 | $209,035 |
What depreciation really does for you
Depreciation lets you deduct the building’s cost over 27.5 years even though you paid for it on day one and it may be gaining value. On a rental that throws off $4,000 of cash a year, a $9,000 depreciation deduction can make the property show a tax loss while money lands in your account.
The deduction is worth exactly your marginal rate — the rate on your last dollars of income, not your average rate — which is why the same write-off saves a high earner more than a new investor. Can’t quite picture why your top bracket matters and your average rate doesn’t? ahaboo slices a paycheck into its brackets, layer by layer.
Three rules that trip people up
- Land never depreciates. Using 100% of the price is one of the most common audit adjustments.
- You can’t skip it. Recapture on sale is based on depreciation “allowed or allowable,” so you owe it whether or not you claimed it. Missed years can be caught up with IRS Form 3115.
- Appliances, carpet and land improvements have shorter lives (5 and 15 years) and may qualify for bonus depreciation. A cost segregation study can reclassify part of the basis. This calculator covers the building itself.
General information based on IRS Publications 527 and 946, not tax advice. Ask a CPA before filing.
Questions investors ask
How is rental property depreciation calculated?
Residential rental buildings are depreciated with the straight-line method over 27.5 years under MACRS (IRS Publication 527 and 946). Your basis is the purchase price plus most closing costs and capital improvements, minus the value of the land, which is never depreciable. Divide the building basis by 27.5 for a full year’s deduction.
What is the mid-month convention?
For residential rental property, the IRS treats the building as placed in service in the middle of the month you first make it available for rent. In the first year you deduct only the months from that midpoint to 31 December, and the final partial year falls in year 29.
How do I figure out the land value?
The simplest defensible method is the ratio on your county property-tax assessment: if the assessor values the land at 20% of the total, allocate 20% of your purchase price to land. An appraisal that separates land and building also works.
What is depreciation recapture?
When you sell, the depreciation you took (or were allowed to take) is taxed as “unrecaptured Section 1250 gain” at a maximum federal rate of 25%. A 1031 exchange can defer it. Depreciation is still valuable because you get the deduction now and pay later, often at a lower rate.
Can I deduct depreciation if my rental makes money?
Yes. Depreciation is a non-cash expense that reduces your taxable rental income even when the property produces positive cash flow. Losses beyond your rental income may be limited by the passive activity rules; the $25,000 allowance for active participation phases out between $100,000 and $150,000 of modified AGI.