Rental property depreciation calculator

Residential rental property is depreciated straight-line over 27.5 years under MACRS. First, subtract the land value from the purchase price — land is never depreciable. Then divide the result (your depreciable basis) by 27.5. In the first year you only get a partial deduction based on which month you placed the property in service, using the IRS mid-month convention.

In the year you first rent (or make available to rent) the property, you are treated as placing it in service on the 15th of the month you actually acquired it. You get the fraction (12.5 minus the month number) ÷ 12 of the annual amount. A property placed in service in January gets 11.5/12 ≈ 95.8% of the annual deduction; one placed in December gets only 0.5/12 ≈ 4.2%.

The IRS requires you to allocate between land and building based on fair market value at the time of purchase. The most defensible source is your county property tax assessment, which typically shows land and building separately. Appraisals also work. Common ranges are 15–25% land in most suburban markets, up to 40%+ in high-cost urban areas where location drives the value. Overstating land reduces your deduction; understating it is an audit risk.

Bonus depreciation under §168(k) applies to "qualified property" — which for rentals is personal property (5-year MACRS), not the building itself. Appliances, carpeting, flooring, and standalone HVAC units qualify. The 2026 rate is 20% (down from 100% in 2022, phasing down 20% per year under the Tax Cuts and Jobs Act). The remaining basis depreciates over 5 years using regular MACRS.

Depreciation taken during ownership is "recaptured" at sale and taxed at up to 25% (Section 1250 unrecaptured gain) — higher than the standard long-term capital gains rate. A 1031 exchange defers both the recapture and the capital gains. Track every year of depreciation on Form 4562 so your CPA can calculate the correct adjusted basis at sale.