About the Rental Property Depreciation Calculator
US landlords can deduct the cost of a rental building — but not the land under it — over its recovery period. This rental property depreciation calculator works out your depreciable basis (purchase price plus capitalized closing costs and improvements, minus land value), then applies the straight-line MACRS method: 27.5 years for residential rental property and 39 years for nonresidential (commercial) real property.
The recovery periods and conventions follow current IRS rules for the 2026 tax year (IRS Publications 527 and 946). It uses the mid-month convention the IRS requires for real property, so the first-year deduction depends on the month the property was placed in service (ready and available to rent, not necessarily the purchase month). The full year-by-year schedule shows each deduction and the remaining basis, and an optional tax rate estimates how much federal income tax the deduction may save each year if you can use the loss (passive activity loss limits can defer it).
It is intended for individual investors, house hackers renting part of a home and anyone checking a tax preparer’s figures. Depreciation reduces your basis and is generally recaptured (taxed at up to 25%) when you sell, and it is claimed on Form 4562 and Schedule E. Confirm your land allocation and figures with a tax professional.
With the default inputs, the annual depreciation (full year) is $10,363.64. Change any value above to recalculate instantly.
How to use the rental property depreciation calculator
- 1Enter the purchase price and closing costs that are added to basis.
- 2Add any capital improvements made before the property was rented.
- 3Enter the land value — use the county assessor’s land ratio if unsure.
- 4Choose residential (27.5 years) or commercial (39 years).
- 5Pick the month and year the property was placed in service and your tax rate.
- 6Review the annual deduction and the full schedule.
Formula and method
Residential rental buildings are depreciated with the straight-line method over 27.5 years and nonresidential real property over 39 years under the General Depreciation System (GDS) of MACRS. Only the building and improvements are depreciable, so the land value is subtracted from the cost basis first.
Real property uses the mid-month convention: it is treated as placed in service in the middle of the month, so a January start earns 11.5 months of depreciation in year one and a December start earns just half a month. Every following year gets a full 1/27.5 (3.636%) or 1/39 (2.564%) of basis until the basis is used up, which means the schedule runs 28–29 calendar years for residential property and 40 for commercial.
- Basis
- Depreciable cost of the building
- Recovery period
- 27.5 years residential, 39 years nonresidential
- Month
- Month placed in service (1 = January)
Worked examples
$350k rental placed in service in January
Basis is $350,000 + $5,000 − $70,000 land = $285,000. Dividing by 27.5 gives $10,363.64 a year. A January start earns 11.5 months in year one, or $9,931.82. At a 24% tax rate the full-year deduction saves about $2,487. The last sliver is deducted in 2053.
$500k rental with $20k improvements, placed in service in July
Basis is $528,000 minus $150,000 of land, or $378,000, giving $13,745.45 a year. July earns 5.5 months in year one — $6,300 — so the schedule runs through 2054. At 32% the yearly tax saving is about $4,399.
Commercial building placed in service in October
Nonresidential property is depreciated over 39 years: $915,000 ÷ 39 = $23,461.54 a year. October gives 2.5 months in year one ($4,887.82), and the schedule ends in 2065.
Frequently asked questions
Why is rental property depreciated over 27.5 years?+
The IRS assigns residential rental property a 27.5-year recovery period under MACRS GDS, with the straight-line method and mid-month convention. Nonresidential real property such as offices and retail uses 39 years.
Can I depreciate the land?+
No. Land does not wear out, so its value must be excluded from basis. Many investors use the county property tax assessment’s land-to-total-value ratio to split the purchase price; an appraisal can support a different allocation.
When does depreciation start?+
Depreciation starts when the property is placed in service — ready and available for rent — not when you bought it or when the first tenant moved in. It stops when you have recovered the full basis or retire the property from service, such as by selling it.
What is depreciation recapture?+
When you sell, the depreciation you were allowed to take (whether or not you claimed it) reduces your basis, and the resulting gain attributable to it is generally taxed as unrecaptured Section 1250 gain at a maximum 25% federal rate.
Can I deduct depreciation if my rental shows a loss?+
Rental losses are generally passive. If you actively participate, up to $25,000 of passive rental losses a year can offset other income, phasing out between $100,000 and $150,000 of modified adjusted gross income; losses you cannot use are carried forward to future years or until you sell.
Are closing costs depreciable?+
Many buyer closing costs — title insurance, recording fees, legal fees, transfer taxes and survey costs — are added to basis and depreciated. Costs of getting the loan, such as points, are amortized over the loan term instead, and prorated taxes and insurance are not added to basis.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.