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Rental Property Depreciation Calculator
Work out the yearly depreciation deduction for a rental house, condo, apartment or commercial building: add closing costs and improvements, take out the land, and apply straight-line depreciation over 27.5 or 39 years with the IRS mid-month convention.
Last updated:
Property cost
$
$
Title, recording, legal, transfer taxes (not loan costs).
$
Later improvements get their own schedule.
Land value
$
From the property tax assessment ratio or an appraisal.
%
Use
Property type
When it was ready and available for rent.
%
E.g. 50% if you live in one unit of a duplex.
%
Enter your values to see the result.
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How to use the Rental Property Depreciation Calculator
Enter the purchase price, closing costs that go into basis and any improvements made before renting.
Enter the land value in dollars or as a percent of cost.
Pick residential or commercial and the date the property was ready to rent.
Set the rental-use share, your tax rate and how long you plan to own it.
Calculate to see the annual and first-year deduction and the full schedule.
First year = full-year deduction × (12 − month placed in service + 0.5) ÷ 12
First-year percentage by month placed in service
Month
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
27.5-year
3.485
3.182
2.879
2.576
2.273
1.970
1.667
1.364
1.061
0.758
0.455
0.152
39-year
2.461
2.247
2.033
1.819
1.605
1.391
1.177
0.963
0.749
0.535
0.321
0.107
Percent of the depreciable basis (IRS Publication 946, Tables A-6 and A-7a). Middle years are 3.636% (or 3.637%) and 2.564%.
Tips for landlords
Furniture, appliances and carpet in a rental are 5-year property, and land improvements such as fences and driveways are 15-year property. Separating them (a cost segregation) speeds up deductions; use the MACRS calculator for those.
Repairs vs improvements: ordinary repairs are deducted in full the same year, while improvements that better, restore or adapt the property are depreciated over 27.5 years from when they are placed in service.
Passive loss limits may delay the tax benefit: rental losses are generally deductible up to $25,000 a year for active participants with modified AGI under $100,000, phasing out by $150,000.
Report depreciation on Form 4562 in the first year and on Schedule E every year.
Frequently asked questions
How do you calculate depreciation on a rental property?
Depreciable basis = purchase price + closing costs + improvements − land value. Divide it by 27.5 for residential rental property (39 for commercial) to get the full-year deduction. The first and last years are prorated with the mid-month convention. For example, a $408,000 cost with $80,000 of land gives $328,000 ÷ 27.5 = $11,927 a year.
Why can't I depreciate the land?
Land does not wear out, so the IRS does not allow depreciation on it. You must split the cost between land and building, commonly using the ratio on the property tax assessment or an appraisal. A higher building share means a larger deduction.
What is the mid-month convention?
Real property is treated as placed in service in the middle of the month. A property placed in service in March gets 9.5 months of depreciation in year 1 (12 − 3 + 0.5), and the remaining half month is taken in the final year, so 27.5-year property spans 28 or 29 tax years.
When does depreciation start?
When the property is placed in service, meaning ready and available for rent, even if no tenant has moved in yet. It is not the closing date if you renovate first, and depreciation stops when you sell or convert it back to personal use.
Which closing costs can be added to basis?
Title insurance, recording fees, legal fees, surveys, transfer taxes and amounts owed by the seller that you pay can be added. Loan costs such as points are amortized over the loan, and prepaid items like insurance or property tax are deducted as expenses instead.
What happens to depreciation when I sell?
Depreciation lowers your adjusted basis, increasing the gain on sale. The part of the gain equal to depreciation allowed or allowable is unrecaptured Section 1250 gain, taxed at up to 25%. This applies even if you forgot to claim it, so it pays to take the deduction every year.
Is a short-term rental depreciated differently?
A property where the average stay is 30 days or less is usually not residential rental property for depreciation purposes and uses 39 years instead of 27.5. Treat it as commercial in this calculator if that rule applies to you.
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