Property Depreciation Schedule Calculator

Property depreciation is one of the most powerful tax advantages available to real estate investors. It lets you deduct the cost of a building, though never the land under it, over an IRS-defined useful life. The deduction reduces your taxable income every year even while the property itself is going up in value, which is the part that makes it unusual among tax breaks.

MACRS Straight-Line Formula:

Annual Depreciation = Depreciable Basis / Recovery Period

Depreciable Basis = Purchase Price − Land Value + Capital Improvements

Recovery periods under MACRS:

• Residential rental property: 27.5 years
• Commercial property: 39 years
• Land: Not depreciable, ever

Worked example: You purchase a residential rental for $350,000. An appraiser values the land at $70,000 (20% of purchase price). Depreciable basis = $350,000 − $70,000 = $280,000 Annual depreciation = $280,000 / 27.5 = $10,182/year Monthly non-cash deduction = $849/month

Mid-month convention. Real estate uses it, and the calculator applies it. Whatever day of the month you actually close, the IRS treats the property as placed in service at the midpoint of that month. So your first year claims:

First-year fraction = (12 − service month + 0.5) ÷ 12

Buy in January and you claim 11.5/12 of a full year, or 3.485% of basis on a 27.5-year schedule. Buy in December and you claim 0.5/12, a little under 0.2%. Nothing is lost either way, the remainder is picked up in the year after the recovery period ends, but it changes what you can deduct in the year you actually bought. A late-December closing is a much smaller first-year deduction than most buyers expect.

Key rules and gotchas:

• Land value is typically estimated at 15–25% of total property value, or sourced from the tax assessor’s office
• Capital improvements (new roof, HVAC, additions) are depreciated separately, often on different schedules
• Cost segregation studies identify components (appliances, flooring, landscaping) that qualify for 5-, 7-, or 15-year accelerated depreciation
• When you sell, the IRS recaptures depreciation at up to 25% under Section 1250. It does so on the amount you were allowed to claim, not the amount you actually claimed. Skipping the deduction does not spare you the recapture. Take it.
• You can continue depreciating even if the property’s market value is rising

Reference: Annual depreciation by basis and property type:

This calculator generates your full depreciation schedule year-by-year, so you can plan ahead and maximize your tax benefits.

One thing it does not take is capitalised closing costs. Title fees, recording fees, transfer taxes and survey costs go into the basis alongside the purchase price, and on a mid-priced house they usually add one to two percent to it. The rental property depreciation calculator has a box for them, and returns the same schedule as this page once the two bases match.