Finance category
Mortgage, loan, investing, tax, and money calculators.
Rental Depreciation Calculator
Depreciation is often the biggest tax shield a rental delivers — turning positive cash flow into a paper loss for years. This calculator sets basis, applies the 27.5 or 39-year recovery period, and sizes the first-year mid-month amount.
land isn't depreciable
Annual depreciation
$12,764
straight-line
First-year (mid-month)
$10,105
Annual tax shield
$4,084
at your marginal rate
10-year tax shield
$40,844
Depreciable basis
$351,000
building + improvements
Recovery period (years)
27.5
How the math works
Residential rental property depreciates over 27.5 years; commercial over 39. The IRS uses the mid-month convention: the first year gets depreciation starting mid-month of placement.
Only the building is depreciable — land is not. A typical split puts 20–30% of purchase price on land. Improvements (new roof, HVAC, etc.) add to basis over time. Sale triggers recapture tax up to 25% on the depreciation taken.
How to Use
- Enter purchase price and the land share of that price. Typical: 20–30% for land.
- Enter any capital improvements added to basis (new roof, kitchen remodel, etc.).
- Pick residential (27.5 years) or commercial (39 years).
- Enter the month the property was placed in service for the mid-month convention.
- Enter marginal tax rate to size the tax shield.
Frequently Asked Questions
Why isn't land depreciable?
Depreciation is a recovery of cost for a wasting asset — land doesn't wear out. The IRS splits purchase price between building (depreciable) and land (not). Most investors use the tax assessor's ratio as a starting point.
What's the mid-month convention?
First-year depreciation is prorated assuming the property was placed in service in the middle of the stated month. A March placement gets depreciation for 9.5 months (9.5/12 of the annual amount).
What happens when I sell?
Depreciation recapture: the depreciation taken is taxed as ordinary income up to 25% (Section 1250 unrecaptured gain). Run our Depreciation Recapture Tax Calculator to size this at sale.
Can I speed this up?
Yes — cost segregation breaks out 5-year and 15-year components (flooring, cabinets, landscaping) and bonus depreciation can accelerate those. Expect a 15–30% first-year deduction boost on a typical residential rental.
Related Calculators
Depreciation Schedule Calculator
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Depreciation Recapture Tax Calculator
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Cost Segregation Calculator
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Bonus Depreciation Calculator
First-year boost on 5- and 15-year property.
Rental Property Tax Deduction Calculator
Combine depreciation with cash expenses for full Schedule E picture.
1031 Exchange Calculator
Defer recapture and gains by swapping into a new property.
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