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Rental property depreciation calculator
Residential rental property depreciates over 27.5 years, straight-line, using the IRS mid-month convention. Enter your numbers for the annual deduction and a year-by-year schedule.
First year is prorated by the mid-month convention: it counts a half-month in the month placed in service.
Educational estimate for residential real property (27.5-yr straight line, mid-month), not tax advice. Appliances, carpet, furniture, and land improvements use different (MACRS) schedules. Confirm with your CPA. For what the deduction saves by property value, bracket, and land share, see the table below.
Year-by-year schedule
| Year | Depreciation | Accumulated | Remaining basis |
|---|
How residential depreciation works
You depreciate the building, never the land, so the first move is splitting your cost basis into land vs. structure (the county assessor’s ratio is the common shortcut). The building portion is written off evenly over 27.5 years. What belongs in basis, and how to defend the land split, is covered below.
The mid-month convention means the IRS treats property as placed in service in the middle of that month, so your first and final years are partial. That is why the year-one number above is smaller than the full-year amount.
What goes into the basis, and how to split out the land
Your basis is the purchase price plus the closing costs the IRS makes you capitalize: title insurance, recording fees, legal fees, transfer taxes, and the survey. It is not your loan amount or your down payment. Loan points, prepaid interest, and the insurance or property tax prepaid into escrow stay out. Those are deductions of their own.
The land comes out next. The county assessor's ratio is the usual source: if the assessment calls one-sixth of the value land, apply one-sixth to your price. An appraisal is more defensible when the split is unusual. Whatever you use, write down why. An aggressive split (calling 5% of a house land to inflate the building) is a classic audit flag, and the assessor's number is the safe one.
The default inputs above are a worked example. A $300,000 rental with $50,000 of land leaves a $250,000 building, and $250,000 ÷ 27.5 is $9,091 a year. Listed for rent in June, it counts as in service on June 15, so year one gets 6.5 months: $9,091 × 6.5 ÷ 12 = $4,924. Then come 26 full years at $9,091 and a final 11.5-month stub of $8,712, which closes the schedule on exactly $250,000.
"Placed in service" means ready and available to rent, not the day a tenant moves in or the day you closed. A house that sits vacant but listed and rent-ready is in service. One still under renovation is not.
Renovations and improvements get their own clock
A new roof, an HVAC system, an addition, or a gut remodel is not a repair you deduct this year, it is a capital improvement with its own basis and its own fresh 27.5-year schedule, starting the month it is placed in service. So a property that has depreciated for six years can easily have three or four separate schedules running at once. A routine repair, by contrast, is deducted in full the year you pay it, see repairs vs. improvements for which side of the line a cost falls on.
Add them below and the table underneath runs every clock at once, which is what your Schedule E line 18 is: the building plus each improvement, each in its own year. Nothing is stored or sent anywhere.
Building plus improvements, year by year
With no improvements added, this is the same schedule as above.
| Year | Building | Improvements | Total (Schedule E line 18) |
|---|
Structural improvements run 27.5-year straight line on the mid-month convention, like the building. Appliances, carpet and furniture run the 5- and 7-year MACRS tables, land improvements the 15-year table, all on the half-year convention, which is why their first year is a half year rather than a part month. Since July 2025 those faster classes can be taken in full in year one under 100% bonus depreciation instead; this table shows the schedule, not the election.
What depreciates faster than 27.5 years
Not everything rides the 27.5-year track. Pulling these out of the building is the heart of a cost-segregation study, which front-loads deductions:
- 5 to 7 years (MACRS): appliances, carpet, and furniture.
- 15 years: land improvements like fences, driveways, and landscaping.
- 27.5 years: the building itself and most structural improvements (what this calculator models).
- Never: the land, and your own labor.
The full asset-by-asset table, including the items that surprise landlords (a 20-year roof depreciates over 27.5 years, a 15-year refrigerator over 5), is in how long to depreciate every rental asset. And since July 2025, everything on those fast clocks qualifies for 100% bonus depreciation, permanently: the full cost in year one instead of the schedule. The building this calculator models stays on its 27.5 years either way. For the official class lives, IRS Publication 946 is the reference, and Publication 527 covers residential rental property specifically.
What the deduction is worth, by property value
Here is the same engine our bookkeeping files with, run at a 25% land share with the property placed in service in January:
| Property value | Building basis | Annual deduction | Tax saved/yr at 24% | Accumulated after 10 yrs | Max recapture (25%) |
|---|---|---|---|---|---|
| $200,000 | $150,000 | $5,455 | $1,309 | $54,318 | $13,580 |
| $300,000 | $225,000 | $8,182 | $1,964 | $81,477 | $20,369 |
| $400,000 | $300,000 | $10,909 | $2,618 | $108,636 | $27,159 |
| $500,000 | $375,000 | $13,636 | $3,273 | $135,795 | $33,949 |
| $750,000 | $562,500 | $20,455 | $4,909 | $203,693 | $50,923 |
| $1,000,000 | $750,000 | $27,273 | $6,545 | $271,591 | $67,898 |
Tax saved is federal only: the deduction times the bracket. Scale it to yours (the $400,000 row saves $2,400 a year at 22% and $3,491 at 32%), and state tax adds to it. The accumulated column sits a little under ten full years because year one is 11.5 months under the mid-month convention.
The land share is the lever you control at setup. On a $500,000 property, a documented 20% land share gives a $14,545 annual deduction and 30% gives $12,727. That is about $1,800 a year for 27.5 years, which is why the source of your split deserves a page in the file.
Recapture does not cancel the savings. The deduction saves at your full bracket every year, while recapture is taxed once, at sale, at your ordinary rate capped at 25%. Depreciation can also bank value for later: when passive-loss limits block the deduction, it piles up as a suspended loss that a taxable sale releases in full. On a two-property portfolio our books track, that balance reached about $206,589, and releasing it beat a 1031 deferral on the same numbers.
Method: residential rental, 27.5-year straight line, building-only basis, mid-month first year. Annual deduction = basis ÷ 27.5; max recapture = accumulated × 25%. Free to cite with attribution to Oberlin24 and a link to this page.
The bill at sale: depreciation recapture
Depreciation is a timing strategy, not free money. Every dollar you depreciate lowers your cost basis, so when you sell, your taxable gain is larger by exactly the depreciation you took, and that slice is taxed as unrecaptured Section 1250 gain at up to 25%, separate from the capital-gains rate on appreciation (the full exit-side math is in how recapture is calculated). The Accumulated column above is the number that comes back at sale. It also belongs on your books as a contra-asset line; the free rental property balance sheet template carries it built in, so your equity number stays truthful. A 1031 exchange defers both the recapture and the gain, and suspended passive losses released at sale often offset a chunk of it, model it with the sell vs. hold vs. 1031 calculator before you list. None of this means skip depreciation: the IRS taxes the depreciation you were allowed to take whether you claimed it or not, so the move is always to claim it and plan the sale. That paper deduction is also what lets many landlords pay little or no tax on rental income in the holding years.
Frequently asked questions
How do you calculate depreciation on a rental property?
Split the purchase price into land and building, depreciate only the building over 27.5 years straight-line (for example $250,000 divided by 27.5 is $9,091 a year), and prorate the first and final years with the mid-month convention. The four inputs are all you need: purchase price, land value, the month it was placed in service, and any improvements on their own clocks.
How much of a rental property can you depreciate?
Only the building, never the land. Carve the land value out of your basis first (the county assessor's land-to-building ratio is the common shortcut), then depreciate the building portion over 27.5 years. On a $300,000 property with $50,000 of land you depreciate the $250,000 building, about $9,091 a year for 27.5 years.
How much is depreciation recapture when I sell?
Every dollar you depreciate lowers your cost basis, so it raises your taxable gain by the same amount when you sell. That slice is taxed as unrecaptured Section 1250 gain at up to 25%, separate from the capital-gains rate on appreciation. The 'Accumulated' column in the schedule above is exactly the number that comes back at sale. A 1031 exchange defers it; a step-up at death erases it.
Can I depreciate a renovation or remodel?
Yes, but a capital improvement (a new roof, HVAC, an addition, a gut remodel) is not deducted this year, it starts its own 27.5-year schedule the month it is placed in service. A property that has depreciated for six years can have three or four separate schedules running at once. A routine repair, by contrast, is deducted in full the year you pay it.
How do I depreciate furniture and appliances?
Not on the 27.5-year track. Appliances, carpet, and furniture use a faster 5-to-7-year MACRS schedule, and land improvements like fences and driveways use 15 years. Pulling these out of the building to depreciate them faster is the heart of a cost-segregation study. This calculator models the 27.5-year building only; the faster classes are separate schedules.
How do I track depreciation across multiple years and improvements?
That is the hard part, not the math. The IRS expects the same numbers carried forward consistently and recapture ready at sale, and each improvement is its own schedule with its own start date. A spreadsheet works for one property; across several, with improvements landing in different years, it is exactly the kind of running ledger the Oberlin24 AI keeps straight in the background.
How much does depreciation save on a rental property each year?
On a $400,000 rental with a 25% land share, the deduction is $10,909 a year (the $300,000 building over 27.5 years). At a 24% federal bracket that saves about $2,618 a year, before any state tax. The table on this page runs the same math from $200,000 to $1,000,000.
Why does the land share matter so much?
Land never depreciates, so every dollar assigned to land produces no deduction for 27.5 years. On a $500,000 property, documenting a 20% land share instead of 30% is worth about $1,800 more deduction every year. The county assessor's land-to-building ratio is the standard, defensible source for the split.
What if I never claimed depreciation in past years?
You still owe recapture on it at sale, because the IRS reduces your basis by the depreciation allowed or allowable, claimed or not. Missed one year? An amended return usually fixes it. Missed two or more? The fix is Form 3115, a change in accounting method that catches up the missed depreciation in the current year instead of amending every old return. Going forward, the deduction runs through Form 4562 onto Schedule E line 18 each year.