A rental property depreciation calculator shows your annual MACRS depreciation deduction, accumulated depreciation, and a year-by-year schedule — key for tax planning and estimating depreciation recapture when you sell.
Property Details — 2026
Land cannot be depreciated — only the building
Additions that increase value or extend life
Mid-month convention — affects year 1 deduction
Used for gain and recapture estimate
How to Calculate Rental Property Depreciation
This rental property depreciation calculator uses the Modified Accelerated Cost Recovery System (MACRS) which the IRS requires for all real property placed in service after 1986.
Establishing the Depreciable Basis
Start with your purchase price plus closing costs you can capitalize (title, recording fees, transfer tax). Subtract the land value — only the building can be depreciated. Add any capital improvements you made. For a $350,000 property with 20% land allocation, your depreciable basis is $280,000.
Mid-Month Convention and Year 1
MACRS uses the mid-month convention for real property. Regardless of the actual day you close, you're treated as if you placed the property in service at the middle of that month. A property purchased in August gets (4.5 months / 12) × annual depreciation in year one — roughly 37.5% of a full year. This is why the year-by-year schedule shows a smaller first-year deduction.
Annual Deduction Amount
Residential rental property: divide your depreciable basis by 27.5. On $280,000 basis, annual depreciation = $10,182. Commercial property uses 39 years instead. Claim this on Schedule E each year you own the property.
Planning for Depreciation Recapture
Every dollar of depreciation you claim reduces your tax basis. When you sell, recapture tax (25%) applies to all depreciation taken. Plan for this when selling or consider a 1031 exchange to defer both capital gains and recapture taxes.
FAQ
How is rental property depreciation calculated?
Residential rental property uses 27.5-year straight-line depreciation under MACRS. Annual depreciation = (Purchase price − Land value + Improvements) ÷ 27.5. Commercial property uses 39 years. The first and last year are pro-rated using the mid-month convention.
What is the mid-month convention?
MACRS residential rental property uses the mid-month convention — property placed in service at any point during a month is treated as if placed in service at the middle of that month. This affects year 1 deduction. For example, a property placed in service in August gets 4.5 months of depreciation in year one.
What is depreciation recapture?
When you sell rental property, the IRS taxes previously claimed depreciation at a maximum rate of 25% (Section 1250 unrecaptured depreciation), not the lower capital gains rate. If you claimed $50,000 in depreciation over the years, up to $50,000 of your sale profit is taxed at 25%.
Can I depreciate land?
No, land cannot be depreciated because it does not wear out. You must allocate purchase price between the building (depreciable) and land (not depreciable). Typical land-to-building ratios range from 10–30% for residential property. Use tax assessor allocation or an appraisal to support your allocation.
Can I deduct depreciation even if the property appreciates?
Yes. Depreciation is a paper loss based on the IRS's assumption that buildings wear out over time. You can deduct depreciation regardless of whether the actual property value goes up or down.
What counts as an improvement vs a repair?
Repairs (fixing existing items to maintain normal condition) are generally deductible in the year paid. Improvements (additions or restorations that add value or extend useful life) must be capitalized and depreciated over their own recovery period.
What is cost segregation?
Cost segregation is an engineering study that identifies property components that can be depreciated faster than the 27.5/39-year standard. Personal property (carpets, appliances, fixtures) may qualify for 5 or 7-year depreciation, and bonus depreciation allows accelerated first-year deductions for qualified property.
Is this calculator free?
Yes, completely free with no signup required. All calculations run locally in your browser. For educational purposes only — consult a tax professional for your specific depreciation schedule.