# What is rental property depreciation?

Works out the yearly depreciation of a residential rental building over 27.5 years with the IRS mid-month MACRS table, from its cost, land value and month placed in service.

- Page: https://www.acalculator.org/finance/rental-property-depreciation-calculator
- JSON spec: https://www.acalculator.org/finance/rental-property-depreciation-calculator.json
- Version: 5dd232b94cdb

## Default answer

Example with the default inputs (Cost of the property $185,000.00, Land value $25,000.00, Month placed in service February, Year placed in service 2026): A rental property that cost $185,000.00, with $25,000.00 of land, placed in service in February depreciates $5,091.20 in the first year and $5,817.60 in a full year, through 2053.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| cost | Cost of the property | What the rental property cost, land included: the price plus settlement costs and improvements. |
| land | Land value | The part of the cost that is for the land, which is never depreciated. |
| month | Month placed in service | The month the property was ready and available for rent. |
| year | Year placed in service | The calendar tax year the property was ready for rent; it labels the rows. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| first | Depreciation in the first year | Basis × the first-year rate for the month placed in service ÷ 100. |
| basis | Basis for depreciation | The cost of the property less the land value. |
| second | Depreciation in a full year | Basis × 3.636 ÷ 100: year 2, and about every later year. |
| rate | First-year rate | The Table A-6 percent for recovery year 1 and the month placed in service. |
| total | Total depreciation | The sum of every year: the whole basis. |
| years | Tax years with a deduction | How many tax years the schedule runs: 28 or 29. |
| last | Last tax year | The tax year of the final deduction. |

## Method

Basis = cost − land. Depreciation for a recovery year = basis × the IRS Table A-6 rate for that year and the month placed in service ÷ 100 (27.5-year straight line, mid-month convention).

## Assumptions

- Residential rental property under the General Depreciation System: straight line over 27.5 years with the mid-month convention, from IRS Publication 946 Table A-6.
- A calendar tax year, and the property is rented for the whole recovery period. A year of sale deducts less.
- Arithmetic is exact on the typed amounts; money shows to the cent, halves rounded up.

## Worked examples

1. cost = $185,000.00, land = $25,000.00, month = 2, year = 2026 gives first = $5,091.20, basis = $160,000.00, second = $5,817.60, rate = 3.182%, total = $160,000.00, years = 28, last = 2053. Source: IRS, Publication 527 (2025), Residential Rental Property, chapter 2, https://www.irs.gov/publications/p527, Table 2-2d example: building $160,000 of $185,000, February: $160,000 × 3.182% = $5,091 (rounded there to the dollar).
2. cost = $147,000.00, land = $0.00, month = 8, year = 2026 gives first = $2,005.08, basis = $147,000.00, rate = 1.364%, years = 29, last = 2054. Source: IRS, Publication 527 (2025), Residential Rental Property, chapter 2, https://www.irs.gov/publications/p527, converted residence example: $147,000 × 1.364% = $2,005 (rounded there to the dollar).
3. cost = $200,000.00, land = $30,000.00, month = 1, year = 2026 gives first = $5,924.50, basis = $170,000.00, second = $6,181.20, rate = 3.485%. Source: IRS, Publication 527 (2025), Residential Rental Property, chapter 2, https://www.irs.gov/publications/p527, land and building split example (basis in the house $170,000); IRS, Publication 946 (2025), How To Depreciate Property, Table A-6, https://www.irs.gov/publications/p946: January, year 1 3.485%.
4. cost = $100,000.00, land = $0.00, month = 7, year = 2023 gives first = $1,667.00, second = $3,636.00, years = 29, last = 2051. Source: IRS, Publication 946 (2025), How To Depreciate Property, Table A-6, https://www.irs.gov/publications/p946: July, year 1 1.667%.

## FAQ

### How do I calculate depreciation on a rental property?

Take the cost of the property, subtract the land, and multiply what is left (the building’s basis) by the IRS rate for each year. A house bought for $185,000 with $25,000 of land has a $160,000 basis. Placed in service in February, year 1 is 3.182%: $5,091.20. A full year is 3.636%: $5,817.60.

### Why can’t I depreciate the land?

Land does not wear out or get used up, so the tax rules never let you depreciate it. Only the building (and improvements to it) is depreciated, over 27.5 years for residential rental property.

### How do I split the price between the land and the building?

Use the fair market value of each when you bought the property. If you are not sure, the IRS lets you use the ratio of the assessed values on the property tax bill: a $200,000 house assessed at $136,000 for the building and $24,000 for the land is 85% building, so the building’s basis is $170,000.

### When does depreciation start?

When the property is ready and available for rent, even before a tenant moves in. A house bought in April, repaired, and ready for rent on July 5 is placed in service in July. The mid-month convention then counts July as half a month.

### How much rental property depreciation do I get each year?

About 3.636% of the building’s basis (1 ÷ 27.5) in each full year. The first year is less, depending on the month: 3.485% for January down to 0.152% for December. The last year takes what is left, so the total is the whole basis after 28 or 29 tax years.

### What happens to the depreciation when I sell?

Depreciation lowers your basis, so it raises your gain. The part of the gain that comes from the depreciation is unrecaptured section 1250 gain, taxed at up to 25%. Use the depreciation recapture calculator to estimate it.

### Can I depreciate improvements?

Yes. An improvement such as a new roof or an addition is depreciated on its own, as residential rental property over 27.5 years from the month it is placed in service. Run the calculator again with its cost, $0 of land, and its month.

## Sources

- IRS, Publication 527 (2025), Residential Rental Property, chapter 2: land is not depreciated; splitting the cost by assessed values ($200,000 house, 85% building, basis $170,000); placed in service when ready and available for rent; Table 2-2d examples ($160,000 building of a $185,000 house placed in service in February, 3.182%, $5,091; a converted residence available August 1, $147,000 × 1.364% = $2,005). https://www.irs.gov/publications/p527 (retrieved 2026-10-19)
- IRS, Publication 946 (2025), How To Depreciate Property: residential rental property is depreciated by straight line over 27.5 years with the mid-month convention; Appendix A, Table A-6 (an image on the page); the July example (year 3: $100,000 × 3.636% = $3,636). https://www.irs.gov/publications/p946 (retrieved 2026-10-19)