Original data
What rental depreciation actually saves: the data
What 27.5-year depreciation is actually worth on a residential rental, computed with the same MACRS engine our bookkeeping product files with: the annual deduction, the tax it saves at each bracket, and the recapture it stores up for the exit. Every number on this page is reproducible from the stated method.
Table 1: the annual deduction and what it saves
| Property value | Building basis (75%) | Annual deduction | Saved/yr at 12% | Saved/yr at 22% | Saved/yr at 24% | Saved/yr at 32% | Saved/yr at 35% | 27.5-yr deductions |
|---|---|---|---|---|---|---|---|---|
| $200,000 | $150,000 | $5,455 | $655 | $1,200 | $1,309 | $1,745 | $1,909 | $150,000 |
| $300,000 | $225,000 | $8,182 | $982 | $1,800 | $1,964 | $2,618 | $2,864 | $225,000 |
| $400,000 | $300,000 | $10,909 | $1,309 | $2,400 | $2,618 | $3,491 | $3,818 | $300,000 |
| $500,000 | $375,000 | $13,636 | $1,636 | $3,000 | $3,273 | $4,364 | $4,773 | $375,000 |
| $750,000 | $562,500 | $20,455 | $2,455 | $4,500 | $4,909 | $6,545 | $7,159 | $562,500 |
| $1,000,000 | $750,000 | $27,273 | $3,273 | $6,000 | $6,545 | $8,727 | $9,545 | $750,000 |
Method: residential rental, straight line over 27.5 years, building-only basis with land at 25% of value (land never depreciates). Annual deduction is the full-year figure, basis ÷ 27.5; the first and final years are prorated by the IRS mid-month convention. Saved/yr = deduction × the marginal federal bracket; state tax would add to these figures. The 27.5-year total equals the full building basis: depreciation defers tax on the entire building cost. (US property only: a foreign rental runs 30 years on ADS, so scale these rows by 27.5/30.)
How the land share moves the number
| Property value | Annual deduction, land 20% | Annual deduction, land 25% | Annual deduction, land 30% |
|---|---|---|---|
| $200,000 | $5,818 | $5,455 | $5,091 |
| $300,000 | $8,727 | $8,182 | $7,636 |
| $400,000 | $11,636 | $10,909 | $10,182 |
| $500,000 | $14,545 | $13,636 | $12,727 |
| $750,000 | $21,818 | $20,455 | $19,091 |
| $1,000,000 | $29,091 | $27,273 | $25,455 |
The land carve-out is the biggest lever landlords control at setup: documenting a 20% land share instead of 30% on a $500,000 property is worth roughly $1,800 more deduction every year for 27.5 years. The county assessor's land-to-building ratio is the standard source.
Table 2: recapture, the counterweight
| Property value | Building basis | Accumulated @ 5 yrs | Max recapture (25%) | Accumulated @ 10 yrs | Max recapture (25%) | Accumulated @ 20 yrs | Max recapture (25%) |
|---|---|---|---|---|---|---|---|
| $200,000 | $150,000 | $27,045 | $6,761 | $54,318 | $13,580 | $108,864 | $27,216 |
| $300,000 | $225,000 | $40,568 | $10,142 | $81,477 | $20,369 | $163,295 | $40,824 |
| $400,000 | $300,000 | $54,091 | $13,523 | $108,636 | $27,159 | $217,727 | $54,432 |
| $500,000 | $375,000 | $67,614 | $16,903 | $135,795 | $33,949 | $272,159 | $68,040 |
| $750,000 | $562,500 | $101,420 | $25,355 | $203,693 | $50,923 | $408,239 | $102,060 |
| $1,000,000 | $750,000 | $135,227 | $33,807 | $271,591 | $67,898 | $544,318 | $136,080 |
Accumulated depreciation (engine figures, mid-month first year) is taxed at sale as unrecaptured Section 1250 gain, at your ordinary rate capped at 25%. The columns show the maximum bill. Depreciation is still worth taking: the deduction saves at your full bracket every year, the recapture caps at 25% once, decades later, and skipping depreciation does not avoid the bill (the IRS recaptures what was "allowed or allowable"). A 1031 exchange defers it (with extra clocks if the property was ever your home); the basis step-up at death erases it.
A real release: when suspended losses beat a 1031
On a real two-property portfolio our books track, the paper losses depreciation created could not be deducted year to year (passive-loss limits) and accumulated as suspended losses: roughly $206,589 by the time a sale was modeled. A fully taxable sale releases that entire balance as a deduction in the year of sale, which outweighed what a 1031 deferral was worth on the same numbers. The instinct said exchange; the math said sell. Depreciation's value is not only the annual deduction: it can bank deductions that release at exactly the moment of the largest taxable event.
Reproducing these numbers
Inputs and method are stated above; the computation is the straight-line MACRS schedule any preparer would run. To check a cell: building basis = value × (1 − land share); annual = basis ÷ 27.5; first year uses 11.5/12 of that (placed in service in January). Our depreciation calculator produces the same year-by-year schedule interactively, and the how-to guide walks the method. Recapture mechanics are covered in our recapture guide.
Citing this page · free to reference with attribution to Oberlin24 (link to this page). Anchor-ready findings:
• A $400,000 residential rental (25% land) generates a $10,909 annual depreciation deduction, saving $2,618/yr in the 24% bracket.
• Over a 10-year hold, that property accrues $108,636 of accumulated depreciation, storing up a maximum recapture bill of $27,159 at sale.
• Documenting a 20% vs 30% land share on a $500,000 rental is worth ~$1,800/yr in extra deductions for 27.5 years.
Frequently asked questions
How much does depreciation save on a rental property per year?
For a typical $400,000 residential rental with a 25% land share, the deduction is $10,909 a year (the $300,000 building over 27.5 years). At a 24% marginal bracket that saves about $2,618 in federal tax every year, before any state tax. Table 1 shows the full grid by property value and bracket.
How were these numbers computed?
With the same MACRS engine our bookkeeping product uses to file: residential rental, straight line, 27.5-year recovery, mid-month convention on the first and final years, building-only basis. The annual figure shown is the full-year deduction (basis divided by 27.5). Every cell is reproducible from the stated inputs; the methodology notes under each table give the formula.
Does depreciation recapture wipe out the savings?
No. The deduction saves at your full marginal rate every single year, while recapture is taxed once at sale, at your ordinary rate capped at 25%, and only on the gain the depreciation created. Skipping depreciation does not avoid recapture either: the IRS reduces basis by what was allowed OR allowable. Table 2 shows the maximum bill at 5, 10, and 20 year holds.
Why does the land share matter so much?
Land never depreciates, so every dollar assigned to land is a dollar that produces no deduction for 27.5 years. Documenting a 20% land share instead of 30% on a $500,000 property is worth roughly $1,800 more deduction per year. The county assessor's land-to-building ratio is the standard, defensible source for the split.
Do these figures include state income tax or bonus depreciation?
No. Saved-per-year columns are federal only; state tax makes the savings larger. The tables model the standard 27.5-year straight-line building schedule, not cost segregation or bonus depreciation on 5/7/15-year components, which accelerate (not increase) the same total basis.
Can I cite or republish these tables?
Yes, free to reference with attribution to Oberlin24 and a link to this page. The cite block above the FAQ has anchor-ready findings. If you need a variant (different values, land shares, or brackets), the methodology is stated and reproducible.