Rental Property Depreciation Calculator

How to Use This Depreciation Calculator

Enter the purchase price of your rental property and the estimated land value percentage (typically 15-25% of the purchase price). Land is not depreciable under IRS rules. The calculator shows your annual depreciation deduction, building value, and land value breakdown. This deduction directly reduces your taxable rental income each year for 27.5 years.

Depreciation Formula

Residential rental property is depreciated over 27.5 years using the straight-line method. Land is not depreciable, typically 15-25% of the purchase price. Depreciation is a non-cash deduction that reduces your taxable income.

Worked Example

You purchased a rental property for $280,000. The land is worth approximately 20% ($56,000), leaving a building value of $224,000. Annual depreciation = $224,000 / 27.5 = $8,145 per year. If you're in the 24% tax bracket, this saves you $8,145 x 0.24 = $1,955 in taxes every year: that's real money back in your pocket from a non-cash deduction.

What is a Good Depreciation?

Depreciation isn't 'good' or 'bad': it's a tax benefit you should always claim on rental properties. The IRS allows residential rental property to be depreciated over 27.5 years using the straight-line method. The key decision is accurately estimating land value: too high and you miss out on deductions, too low and you risk an audit. County tax assessments often break out land vs. improvement value and are a reasonable starting point.

Factors That Affect Depreciation

The three factors that determine your depreciation deduction are purchase price, land value percentage, and time. You can only depreciate the building (improvement), not the land. Cost segregation studies can accelerate depreciation by reclassifying components (appliances, carpet, landscaping) to shorter schedules (5, 7, or 15 years instead of 27.5). When you sell, depreciation is 'recaptured' and taxed at up to 25%, something to plan for. A 1031 exchange can defer this recapture tax.