Rental property depreciation calculator
Estimate the yearly write-off on a rental: how much of the price can be depreciated, the amount each year and the smaller first year.
Yearly depreciation
$8,909
First year
$8,538
Estimated tax savings
$2,138
- Depreciable basis
- $245,000
- Land (not depreciated)
- $60,000
- Per month
- $742.42
How this is calculated
- 1Depreciable basis = price − land value + closing costs added to basis + improvements.
- 2Yearly depreciation = depreciable basis ÷ the recovery period (27.5 years residential, 39 commercial).
- 3First year = yearly depreciation × (12 − month + 0.5) ÷ 12.
- 4Estimated tax savings = yearly depreciation × your tax rate.
This uses straight-line depreciation only. It leaves out cost segregation, bonus depreciation, separate schedules for improvements and limits on rental losses.
Frequently asked questions
- Why can't I depreciate the land?
- Land doesn't wear out, so only the building and improvements can be depreciated. That's why this starts by taking the land's share out of the price.
- Why 27.5 years?
- That's the recovery period for residential rental property under current US rules. Commercial property uses 39 years.
- Why is the first year smaller?
- Rental real estate uses the mid-month convention: the property counts as placed in service halfway through the month it became available to rent.
- Do I have to pay it back when I sell?
- Depreciation you claimed, or could have claimed, is generally taxed when you sell, usually at up to 25% federally. The sell vs keep calculator includes this.
- Will I actually save the tax shown?
- Not always. Limits on passive rental losses can reduce or delay the benefit, depending on your income and how involved you are. A tax professional can tell you what applies to you.