Free Rental Property Depreciation Calculator — Annual Tax Deduction

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Rental Property Depreciation Calculator

Annual deduction · Tax savings · Full depreciation schedule

Property Purchase Price ($)

Land Value ($)

Land is NOT depreciable — typically 15–25% of value

Property Type

Capital Improvements ($)

Additional depreciable improvements

Your Tax Rate (%)

Federal + state marginal rate

Current Year of Ownership

Which year of depreciation are you in?

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Annual Depreciation

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Annual Tax Savings

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Total Depreciable Basis

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Remaining Depreciation

About This Calculator

The Rental Property Depreciation Calculator shows your annual depreciation deduction — one of the most powerful tax advantages of real estate investing. Depreciation allows you to deduct a portion of the property's value each year, reducing your taxable income even while the property may be appreciating in value.

The IRS allows residential rental property to be depreciated over 27.5 years using the straight-line method. Commercial property depreciates over 39 years. Only the building (not the land) is depreciable.

Example: A $350,000 property with $70,000 land value has a $280,000 depreciable basis. Annual depreciation = $280,000 ÷ 27.5 = $10,182/year. At a 28% tax rate, this saves $2,851/year in taxes — nearly $250/month — without any cash outlay.

Frequently Asked Questions

How is rental property depreciation calculated?▼

Depreciation = (Purchase Price − Land Value + Capital Improvements) ÷ Useful Life. For residential rental: useful life = 27.5 years. For commercial: 39 years. The IRS uses the Modified Accelerated Cost Recovery System (MACRS) with mid-month convention in the first and last years.

What is the depreciable basis for rental property?▼

Depreciable basis = Purchase Price − Land Value + Capital Improvements + Acquisition Costs (closing costs that must be capitalized). Land is never depreciable. You can allocate land vs building value using a property tax assessment (which shows separate land and improvement values) or an appraisal.

What is depreciation recapture?▼

When you sell a rental property, the IRS taxes your accumulated depreciation deductions at a 25% recapture rate (higher than the long-term capital gains rate). This is called depreciation recapture (Section 1250 gain). A 1031 exchange can defer both capital gains tax and depreciation recapture indefinitely.

Can I take bonus depreciation on rental property?▼

Residential rental property itself doesn't qualify for bonus depreciation, but certain components (appliances, carpeting, land improvements) can qualify for 100% bonus depreciation in the year placed in service through cost segregation. Cost segregation studies can significantly accelerate depreciation deductions.

Does depreciation affect cash flow?▼

Depreciation is a non-cash deduction — it reduces your taxable income but doesn't cost you any money. This is why real estate can show a paper loss for tax purposes while still generating positive cash flow. Many investors pay zero tax on significant rental income due to depreciation offsetting income.