Property Depreciation Calculator
Compute MACRS depreciation on a rental building over 27.5 or 39 years with the mid-month convention — and see the recapture waiting at the far end of the shelter.
Property Depreciation Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Ignores cost segregation, bonus depreciation and section 179.
- Recapture shown at the 25 per cent ceiling; the actual rate can be lower.
- Assumes the property is held for the whole period without improvements placed on separate schedules.
In short: Depreciation is straight-line over 27.5 years for residential rental, but the mid-month convention cuts the first year. A 850,720 basis deducts 30,935.27 in a full year and only 6,444.85 if placed in service in October.
Formula
annual depreciation = (basis − land) ÷ life
year 1 = annual × (12 − month + 0.5) ÷ 12
[('basis', 'purchase price plus capitalised acquisition costs'), ('land', 'never depreciable, allocated by assessor ratio'), ('life', '27.5 years residential, 39 years commercial'), ('mid-month', 'placed in service at the midpoint of the month')]
Worked Example
- Start from total basis: price plus capitalised closing costs.
- Remove the land allocation — land is never depreciable.
- Divide the remainder by 27.5, or 39 for commercial.
- Scale year one by the mid-month convention.
- Track accumulated depreciation — it becomes recapture at sale.
A 1,063,400 basis with 20% land gives a depreciable basis of 850,720. Full-year depreciation is 30,935.27, or 3.6364%. Placed in service in January the year-one rate is 3.4848% and the deduction is 29,646.30; in October it is 0.7576% and 6,444.85. At a 32% marginal rate a full year shelters 9,899.29. Over ten years — one part-year plus nine full ones — 308,063.76 accumulates and carries 77,015.94 of recapture at 25%, leaving a net benefit of 21,564.46 plus a decade of deferral.
Strengths & Limits Of This Model
Where this engine is strong
- Reproduces the published mid-month table rates exactly
- Nets recapture against the rate at which the shelter was taken
- Refuses a 100 per cent land allocation rather than printing zero
Where it stops
- No cost segregation
- US federal rules only
Practical Use Cases
Filing Schedule E
Computing the correct first-year and ongoing deduction.
Modelling after-tax return
Adding the shelter to cash flow without double-counting it.
Timing a purchase
Seeing how much of year one a December closing forfeits.
Planning an exit
Sizing recapture before it appears on a settlement statement.
Testing a land allocation
Quantifying what an aggressive land split costs over 27.5 years.
Methodology & Editorial Standards
Straight-line MACRS over 27.5 or 39 years with the mid-month convention, matching the published IRS tables: the first-year rate is the full-year rate scaled by (12 − month + 0.5) ÷ 12. Land is excluded before any calculation. Recapture is modelled at the 25 per cent unrecaptured section 1250 ceiling and compared against the marginal rate at which the deduction was taken, because the benefit is the arbitrage between the two plus deferral — not the full deduction.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Property Depreciation Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
How long do you depreciate a rental property?
Twenty-seven and a half years for residential rental property and thirty-nine for commercial, both straight-line under MACRS. Real property receives no accelerated method, unlike the personal property inside it, which is the entire premise of a cost segregation study.
What is the mid-month convention?
The IRS treats real property as placed in service at the midpoint of the month regardless of the actual date, so a property acquired in October gets two and a half months of depreciation in year one rather than three. The forgone fraction is not lost; it is recovered in an extra part-year at the end of the schedule.
Why can't I depreciate the land?
Depreciation recovers the cost of an asset that wears out, and land does not. The split between land and improvements therefore matters a great deal, and the county assessor's own ratio is the support most examiners accept without argument. A high land allocation costs you deductions every year of the hold.
What is depreciation recapture?
At sale, the portion of your gain attributable to depreciation already claimed is taxed as unrecaptured section 1250 gain at up to twenty-five per cent, separately from the capital gains rate applied to genuine appreciation. Depreciation is therefore a deferral and a rate arbitrage, not a permanent exemption.
What does 'allowed or allowable' mean?
Recapture is computed on the depreciation you could have claimed, whether you claimed it or not. An owner who skipped the deduction still pays tax at sale as though they had taken it, so declining to depreciate is a pure loss rather than a conservative choice.
Can I catch up on missed depreciation?
Yes, and usually without amending anything. Form 3115, a change in accounting method, allows the entire cumulative shortfall to be claimed in the current year. This is generally far better than amending, because amendments reach back only three years while the recapture reaches back to the beginning.
Does depreciation reduce my cash flow?
It has no effect on cash at all, which is the point. It is a non-cash deduction that reduces taxable income, so a property can distribute real money while reporting a paper loss. Never add depreciation back into a cash flow projection as though it were income.
What is cost segregation?
An engineering study that reclassifies components — appliances, carpet, cabinetry, landscaping, site work — into five, seven and fifteen year lives instead of leaving them in the building. It accelerates deductions substantially, at the cost of a larger recapture exposure and a study fee that only makes sense above a certain basis.
Does a 1031 exchange avoid recapture?
It defers it. The accumulated depreciation carries over to the replacement property along with the deferred gain, so the liability follows you rather than disappearing. Only a step-up in basis at death removes it, which is why the exchange-until-death pattern is so common in the sector.
Do improvements start their own schedule?
Yes. A capital improvement made after acquisition is a separate asset placed in service on its own date with its own mid-month convention, not an addition to the original schedule. Repairs, by contrast, are deducted in the year paid, and the boundary between the two is one of the most frequently contested questions in rental taxation.