Real Estate Depreciation Calculator
Rental property depreciation under IRS MACRS: 27.5-year residential or 39-year commercial (or ADS 30/40), mid-month first and last years by the month placed in service, closing costs and land split, a full year-by-year schedule, cost segregation with bonus depreciation, tax savings and the recapture due when you sell.
How it works
Building basis = (purchase + closing costs) × (1 − land %) + improvements · Annual depreciation = building basis ÷ recovery period (27.5 yr residential, 39 yr commercial; ADS 30/40) · First year = annual × (12 − month + 0.5) ÷ 12 · Last year = the months left of 330 (27.5 yr) or 468 (39 yr) · Tax saving ≈ deduction × marginal rate · Recapture ≈ depreciation taken × min(rate, 25%)
The IRS lets rental owners deduct the cost of the building — but not the land — over a fixed recovery period using straight-line depreciation: 27.5 years for residential rentals and 39 for commercial property under the general system, or 30 and 40 years under the alternative system. Depreciation starts in the month the property is ready to rent, and the mid-month convention counts that month as half, so a rental placed in service in January deducts 11.5 months in the first year (3.485% of the basis for residential) and one placed in December only half a month. The months missed at the start are taken in a final, partial year 28 or 29 (or 40). The basis is the price plus capitalized closing costs, split between land and building in the same ratio, plus improvements made before renting. The calculator builds the full schedule, shows the tax the deduction saves at your federal and state rates, and estimates the depreciation recapture due if you sell after a given number of years — taxed at up to 25%, so depreciation defers tax rather than removing it. A cost segregation option moves part of the building into 5- and 15-year property, which depreciates faster and can take bonus depreciation (100% for property acquired after 19 January 2025), front-loading the deductions.
Worked example
On a $350,000 residential rental with land valued at 20% of the price, the building basis is $280,000. Divided by 27.5 years, the annual depreciation deduction is $10,181.82 — about $848 a month — worth about $2,444 a year at a 24% tax rate. Placed in service in January, the first year counts 11.5 months: $10,181.82 × 11.5 ÷ 12 = $9,757.58 (3.485%, as in the IRS table); the 6.5 months left over are deducted in year 28 ($5,515.15). After 10 years you will have deducted $101,393.94, and selling then would recapture about $24,335 of tax at 24%.
Sources: IRS Publication 527, Residential Rental Property · IRS Publication 946, How To Depreciate Property · IRS: guidance on the 100% additional first-year depreciation (One, Big, Beautiful Bill)
Frequently asked questions
How do I split the price between land and building?
A common method is the ratio the county assessor uses between land and improvement value on your tax bill; applying that same ratio to your purchase price gives a defensible land allocation. An appraisal can also provide the split. Enter it as a percentage or as a dollar land value; closing costs are split in the same ratio.
Why is my first-year deduction smaller?
Residential and commercial buildings use the mid-month convention: the month you place the property in service counts as half a month, and only the remaining months of that year count. A January start gives 11.5 months (3.485% of the basis for 27.5-year property); a July start gives 5.5 months (1.667%). The missing months come back in a final partial year.
What is depreciation recapture?
When you sell, the depreciation you claimed (or could have claimed) on the building is taxed as unrecaptured §1250 gain at your ordinary rate, capped at 25%, separate from capital-gains tax on any appreciation. Depreciation on cost-segregated 5- and 15-year property is recaptured at ordinary rates. So depreciation defers tax; the calculator estimates the bill for the holding period you enter.
Is a cost segregation study worth it?
It moves typically 15–30% of a building’s basis into 5- and 15-year property. With 100% bonus depreciation that part is deducted in year one, which can produce a large first-year loss. It suits larger properties or high earners who can use the loss (real estate professionals or short-term rental owners who materially participate); the study itself costs money, and the extra deductions are recaptured at ordinary rates on sale.
Can I depreciate my primary residence?
No. Depreciation applies only to property held to produce income, such as a rental. A home you live in is not depreciable, though a portion may become depreciable if you convert part of it to a home office or a rented unit; the basis is then the lower of your cost basis and the fair market value when you convert.
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Educational estimate, not financial or investment advice. Real returns depend on financing, local costs and market conditions. Depreciation rules are complex and change; consult a tax professional.