Depreciation is often the largest deduction a landlord has, and it costs nothing out of pocket each year. The IRS lets you recover the cost of a rental building — but not the land under it — over a fixed recovery period. This calculator applies the rules for real property under the Modified Accelerated Cost Recovery System (MACRS): straight-line over 27.5 years for residential rentals or 39 years for nonresidential buildings, with the mid-month convention, and shows the deduction for every tax year.
How to use the rental property depreciation calculator
- Enter the purchase price of the property.
- Enter the land value, as a percentage of the price or a dollar amount. Land is not depreciable.
- Add capitalized closing costs — such as title, recording, legal and transfer fees — and any improvements made before renting.
- Choose residential rental or nonresidential property.
- Choose the month and year placed in service.
- Optionally enter your marginal tax rate to estimate what the deduction is worth.
The MACRS straight-line, mid-month formula
m is the month placed in service (January = 1). The final year takes whatever months remain, so the total equals the basis.
Worked example
You buy a single-family rental for $420,000 and place it in service in July 2026. The county assessment puts 20% of the value in land, you paid $7,500 in capitalized closing costs, and you spent $3,000 on improvements before listing it.
- Building basis: $336,000 + 80% of $7,500 ($6,000) + $3,000 = $345,000
- Full-year deduction: $345,000 ÷ 27.5 = $12,545.45
- 2026 deduction: 5.5 months → $12,545.45 × 5.5/12 = $5,750.00
- 2027 through 2053: $12,545.45 a year
- 2054: the last half-month, $522.73
At a 24% marginal rate, each full year’s deduction is worth about $3,011 in federal tax.
First-year percentages by month placed in service
| Month | 27.5-year residential | 39-year nonresidential (exact) |
|---|---|---|
| January | 3.485% | 2.457% |
| April | 2.576% | 1.816% |
| July | 1.667% | 1.175% |
| October | 0.758% | 0.534% |
| December | 0.152% | 0.107% |
Full years are 3.636% (27.5-year) and 2.564% (39-year) of basis. The residential column matches IRS Table A-6; the IRS Table A-7a percentages for 39-year property are rounded slightly differently (for example, 2.461% for January).
Rules worth knowing
- Residential rental property is a building where at least 80% of gross rental income comes from dwelling units. Offices, stores and warehouses are nonresidential.
- Later improvements — a new roof, an addition — are depreciated separately over their own 27.5- or 39-year schedule starting when placed in service. Repairs are deducted as expenses.
- Appliances, carpet and furniture used in a residential rental generally have a 5-year recovery period, and land improvements such as fences and driveways 15 years, so they are not included here.
- Report it on Form 4562 for the first year and carry the deduction to Schedule E. IRS Publication 527 covers residential rentals and Publication 946 explains MACRS in detail.
- Allowed or allowable: your basis is reduced by the depreciation you were entitled to, even if you did not claim it, so skipping it does not avoid recapture.
Publication 946 allows depreciation to be figured with its percentage tables or with the straight-line formula; this calculator uses the formula. For ongoing costs of owning the property, see the property tax calculator and mortgage calculator.
Estimates for planning only — not tax or legal advice. Basis, placed-in-service dates and property classification can be complex; confirm with a tax professional.
Frequently asked questions
How is rental property depreciation calculated?
Under MACRS, residential rental buildings are depreciated straight-line over 27.5 years and nonresidential buildings over 39 years, using the mid-month convention. Divide the building's basis by the recovery period for a full year, and prorate the first and last years by the months in service.
What is the mid-month convention?
It treats property as placed in service, or disposed of, in the middle of the month. A building placed in service in July gets 5.5 months of depreciation in its first year, no matter which day in July it was.
Can I depreciate the land?
No. Land does not wear out, so only the building and other improvements are depreciable. Allocate the purchase price between land and building, commonly using the ratio on the local property tax assessment.
When does depreciation start?
When the property is placed in service — ready and available for rent — not necessarily when you bought it or when the first tenant moved in. Time spent renovating before it is available for rent does not count.
What happens to depreciation when I sell?
Your adjusted basis is reduced by depreciation allowed or allowable, which increases your taxable gain. The portion of gain from depreciation on real property is unrecaptured section 1250 gain, taxed at a maximum 25% federal rate.