Rental Property Depreciation Calculator
Estimate your depreciable basis, annual depreciation, first-year deduction, and a simple 5-year schedule.
What is rental property depreciation?
Rental property depreciation is a tax deduction that lets real estate investors recover the cost of income-producing buildings over time. The IRS treats buildings as assets that wear out, even if market value rises. That means you may be able to deduct a portion of your property’s cost each year against rental income.
For most U.S. investors, residential rental property is depreciated over 27.5 years and commercial rental property over 39 years. Land is never depreciated.
How this calculator works
This calculator uses a straight-line depreciation approach and applies a simple first-year proration based on the in-service month (mid-month style estimate). It calculates:
- Depreciable basis = (purchase price - land value + capitalized costs + improvements) × rental use %
- Annual depreciation = depreciable basis ÷ recovery period
- First-year depreciation = annual depreciation × months in service fraction
- Estimated tax savings using your marginal tax rate input
If you use the property partly for personal use, your depreciable amount is reduced by the rental-use percentage.
What should go into your depreciable basis?
Usually included
- Purchase price allocated to the building
- Certain acquisition costs that must be capitalized
- Major improvements (new roof, full HVAC replacement, structural work)
Usually not included
- Land value
- Repairs that are currently deductible in the same year
- Personal-use portion of mixed-use property
Residential vs. commercial recovery periods
Most long-term rental homes, condos, duplexes, and apartment buildings use a 27.5-year life. Office, retail, and many business-use properties typically use 39 years. Picking the wrong class life can materially affect tax reporting, so confirm with your tax preparer.
Example calculation
Suppose you buy a rental home for $350,000. The land is worth $70,000. You have $5,000 in capitalized closing costs and $10,000 in improvements. The property is 100% rental and residential.
- Depreciable basis = (350,000 - 70,000 + 5,000 + 10,000) = $295,000
- Annual depreciation = 295,000 ÷ 27.5 = $10,727.27
- Monthly equivalent ≈ $893.94
If placed in service in February, the first-year amount is prorated and would generally be lower than a full year.
Common depreciation mistakes investors make
- Depreciating land by accident
- Forgetting to reduce basis for personal-use percentage
- Expensing a capital improvement instead of depreciating it
- Missing depreciation entirely (which can still affect gain calculations later)
- Not tracking basis adjustments after renovations
Why depreciation matters for cash flow
Depreciation is a non-cash deduction. You may still collect rent and positive cash flow while reducing taxable income. This can improve after-tax returns and provide more flexibility for reinvesting in your portfolio.
Recordkeeping checklist
- Closing statement with purchase allocation details
- County assessment or appraisal support for land/building split
- Receipts and invoices for capital improvements
- Dates assets were placed in service
- Annual depreciation records from your tax return
Final note
This calculator is designed for educational planning and quick estimates. Tax law is nuanced, and real returns can differ based on MACRS tables, conventions, cost segregation, passive activity rules, and local regulations. Use this as a planning tool and verify numbers with a licensed CPA or tax advisor before filing.