Rental property depreciation calculator
Basis without the land, the first-year deduction under the mid-month convention, a year-by-year schedule, and roughly what it is worth in tax.
27.5 yearsResidential rental property, straight line, mid-month convention.
Depreciation per full year
$9,484
Worth about $2,276 a year in tax at a 24% bracket, if you can use the loss.
- Depreciable basis
- $260,800
- Land (never depreciated)
- $65,200
- First-year deduction
- $5,137
- Taken over the years shown
- $90,490
| Year | Deduction | Basis left |
|---|---|---|
| 1 | $5,137 | $255,663 |
| 2 | $9,484 | $246,179 |
| 3 | $9,484 | $236,696 |
| 4 | $9,484 | $227,212 |
| 5 | $9,484 | $217,728 |
| 6 | $9,484 | $208,245 |
| 7 | $9,484 | $198,761 |
| 8 | $9,484 | $189,278 |
| 9 | $9,484 | $179,794 |
| 10 | $9,484 | $170,310 |
When you sell, the depreciation you took (or could have taken) is taxed as unrecaptured section 1250 gain at up to 25%. This is a planning estimate, not tax advice; your CPA decides the land split and what goes into basis.
The method
- Basis = (price + qualifying closing costs) × (1 − land share) + improvements made before renting.
- Full-year deduction = basis / 27.5.
- First year = full-year deduction × (12 − month placed in service + 0.5) / 12.
Sources: IRS Publication 527, Residential Rental Property; IRS Publication 946, How To Depreciate Property (Table A-6). Passive loss limits can delay when you use the deduction; this is a planning estimate, not tax advice.
Questions people ask
How is rental property depreciation calculated?
Residential rental property is depreciated over 27.5 years, straight line, under the IRS's general depreciation system. Basis is the price plus qualifying closing costs and improvements, minus the land. In the example, $326,000 less 20% land is a $260,800 basis, or $9,484 a year.
Why is the first year smaller?
The mid-month convention treats the property as placed in service in the middle of the month you first offer it for rent. Placed in service in June, the first year counts 6.5 months: $9,484 × 6.5 / 12 = $5,137.
How do I find the land value?
Most owners use the land and improvement split on the county tax assessment and apply it to the price. An appraisal or a cost segregation study can support a different split. Land is never depreciated.
What happens to depreciation when I sell?
The depreciation you took, or were allowed to take, is taxed as unrecaptured section 1250 gain at a maximum 25% rate. A 1031 exchange can defer it. Plan the exit with a CPA before you sell.
Numbers look right?
Send the deal. We check it against the lender's terms and come back with a loan.