Rental Property Depreciation Schedule

Rental property depreciation is one of the best tax advantages small landlords get. You subtract a portion of the building's value from taxable rental income every year for 27.5 years, even though the building is not actually losing value. The result is usually a smaller taxable rental profit, or a paper loss that can offset other income for taxpayers who qualify as real estate professionals or who hit the passive activity loss thresholds.

This calculator builds the schedule year by year. Enter the property's purchase price, the fraction of the price attributable to land (not depreciable), the year the property was placed in service, and how many years of the schedule to display. The tool separates building value from land value, applies the MACRS 27.5-year straight-line method, and shows annual depreciation, cumulative depreciation, and remaining basis for each year of the hold.

For a $350,000 rental with 20% land value, depreciable basis is $280,000 and annual depreciation is $10,182 ($280,000 / 27.5). Over a 10-year hold that is $101,818 of cumulative deduction. On sale, depreciation recapture tax applies to cumulative depreciation at a 25% rate under IRC 1250 unrecaptured gain rules. See the methodology page for how we source the land-value split default and how we handle the half-year / mid-month convention simplification.

Residential rental property is depreciated under MACRS (Modified Accelerated Cost Recovery System) using the 27.5-year straight-line method per IRC 168(c)(1) and IRS Publication 527. Commercial real estate uses 39 years under IRC 168(c)(2); this tool handles residential only. The 27.5-year life is based on IRC 168(e)(2)(A), which classifies property as "residential rental property" when 80% or more of rental income is from dwelling units.

Depreciable basis = purchase_price × (1 - land_value_pct/100). Land is not depreciable because it does not wear out under IRS rules. The land-value split comes from the tax assessor's allocation (look at the property's tax bill for the improvement value vs land value) or from an appraisal at purchase. A 20-30% land share is typical for urban and suburban properties; rural may be lower.

Annual depreciation = building_value / 27.5. Each year's deduction is the same under straight-line. The schedule shown here assumes a full first year; IRS rules apply a mid-month convention to the first and last years per 26 CFR 1.168(d)-1, prorating based on the month the property was placed in service. For a January placement, the first year is nearly the full annual amount; for a December placement, it is only a fraction. The tool does not apply that convention; real tax filings should use Form 4562 and the IRS MACRS tables in IRS Publication 946.

Use this to estimate an annual depreciation deduction for a specific rental, to project tax savings over a holding period, or to size recapture exposure at sale. Your actual tax filing should follow IRS Form 4562 and apply the mid-month convention for partial first and last years per 26 CFR 1.168(d)-1. For a multi-property portfolio, run the calculator once per property and sum the annual deductions; IRS Schedule E aggregates them. Pair with the cap rate calculator and cash-on-cash tool for the full deal picture.