Rental Property Depreciation Calculator

Subtract the land value from the purchase price to get the depreciable basis, then divide by the recovery period: 27.5 years for residential rental property or 39 years for nonresidential real property, using the mid-month convention from IRS Publication 946. For example, a $240,000.00 depreciable basis on a residential property gives $8,727.27 of depreciation per full year.

Land is not depreciable because it does not wear out or get used up. IRS Publication 946 states that most tangible property except land can be depreciated, so the land portion of a purchase price must be excluded from the depreciable basis.

Under the mid-month convention, property placed in service during any month is treated as placed in service at the midpoint of that month. That is why the first-year deduction depends on the month: with a $240,000.00 basis, a residential property placed in service in January gets $8,364.00 in year 1, while one placed in service in July gets $4,000.80.

Divide the depreciable basis by the total months in the recovery period: 330 months for residential (27.5 years) or 468 months for commercial (39 years). A $240,000.00 residential basis gives $727.27 per month. The mid-month convention still controls how much of the first and last year you can claim.

Residential rental property uses a 27.5-year recovery period and nonresidential real property uses 39 years, both straight line with the mid-month convention. On a $240,000.00 basis, that is $8,727.27 per full year residential versus $6,153.85 per full year commercial; a commercial property placed in service in March gets $4,879.20 in year 1.

When you sell, the part of your gain attributable to depreciation you took (or were allowed to take) can be taxed as unrecaptured Section 1250 gain at a maximum rate of 25%, which is higher than normal long-term capital gain rates. For example, $87,272.70 of unrecaptured gain produces an estimated maximum tax of $21,818.18. This is an educational estimate, not tax advice.

The IRS reduces your basis by depreciation allowed or allowable, which means depreciation you could have claimed still counts when you sell. Skipping the deduction does not avoid recapture; it only means you gave up the yearly tax benefit. A tax professional can help you address missed depreciation.

Cost segregation is a study that identifies building components which qualify for shorter recovery periods, such as 5-year personal property, 7-year fixtures, or 15-year land improvements, instead of the 27.5 or 39-year building period. In one illustrative split, year-1 depreciation rises from $8,364.00 (building only) to $13,531.92 with the components separated. A qualified study is required, and bonus depreciation rules have changed over time.

No. Rental buildings depreciated over 27.5 or 39 years are real property and do not qualify for bonus depreciation. Some shorter-lived components identified in a cost segregation study may have qualified for bonus depreciation in certain years, but the percentages and eligibility rules have changed several times, so verify current law with a tax professional.

No. It is an educational tool that applies the arithmetic of IRS Publication 946 Tables A-6 and A-7a. It is not professional tax advice and cannot account for your filing status, other income, state taxes, or law changes. Consult a qualified tax professional before making tax decisions.