Rental Property Depreciation Schedule Calculator
Generate a MACRS depreciation schedule for residential rental (27.5-year) and commercial (39-year) property using the mid-month convention per IRS Publication 946. Separates land from building basis and shows first-year and full-life deductions.
Cost Basis
Land is never depreciable. Only the building (and improvements) qualify. Allocate using the tax assessment ratio or an appraisal.
Property & Service Date
Residential rental uses 27.5-year MACRS straight-line. Commercial uses 39-year. Both apply the mid-month convention per IRS Pub 946.
MACRS Depreciation
Enter cost basis, land value, and service date, then click generate.
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Introduction
Depreciation is the largest non-cash tax deduction a rental property owner gets, and getting the basis wrong is the most expensive mistake in Schedule E reporting. IRS Publication 946 defines the rules: residential rental property is depreciated over 27.5 years and commercial over 39 years, both under MACRS straight-line with the mid-month convention. Land is never depreciable, so the purchase price must be split between building and land before any deduction is computed. A $450,000 rental with $90,000 of land value produces a $360,000 depreciable basis, which is about $13,091 per year for 27.5 years. That deduction shelters rental income from tax every year, and it is the reason real estate generates paper losses while producing positive cash flow. This calculator separates land from building, applies the correct recovery period and convention, and generates the year-by-year schedule including the partial first year.
What This Calculator Does
This tool generates a MACRS depreciation schedule for residential rental (27.5-year) and commercial (39-year) property. It separates the depreciable building basis from non-depreciable land, applies the mid-month convention to the placed-in-service date, and reports the annual deduction, the first-year partial deduction, the monthly deduction, and the first several years of the schedule with cumulative and remaining basis.
The Formula
The recovery period is 27.5 years for residential rental and 39 years for commercial, set by MACRS under IRS Publication 946. Straight-line means the annual deduction is the building basis divided by the recovery period, constant every full year. The mid-month convention treats the property as placed in service in the middle of the month it was actually placed in service, so the first year gets a half-month for the in-service month plus each full month after. A property placed in service in July gets 5.5 months of depreciation in year one. Land is excluded because it does not wear out, so the cost basis must be allocated between building and land using the tax assessment ratio, an appraisal, or a reasonable allocation method. The depreciable basis includes the purchase price plus closing costs that are not financing-related, like legal fees, title insurance, and transfer taxes, but not loan points or mortgage insurance.
Step-by-Step Example
Enter the cost basis and land value
A $450,000 rental purchase with a tax assessment showing $90,000 of land value enters a $450,000 cost basis and $90,000 land value, leaving a $360,000 depreciable building basis.
Select the property type
She selects Residential (27.5-year), since the property is a single-family rental.
Enter the in-service date
She enters July 2026 as the month the property was ready and available for rent.
Read the schedule
Annual depreciation is $13,091, the first-year 2026 deduction is about $6,000 (5.5 months), and the full schedule runs through 2053 with the half-month recovered in the final year.
Real-World Use Cases
Schedule E first-year tax filing
A new landlord computes the partial first-year depreciation to enter on Schedule E so the deduction matches the mid-month convention rather than a full year that would overstate the write-off.
Cost segregation decision support
An investor compares the 27.5-year straight-line deduction against a cost segregation study that reclassifies components to 5-year and 15-year property, to see how much front-loaded depreciation the study would add.
Commercial vs residential recovery comparison
A buyer evaluating a mixed-use property runs both the 27.5-year and 39-year schedules to see how the longer commercial recovery period reduces the annual deduction and changes the after-tax return.
Common Mistakes to Avoid
Depreciating the land. Land does not wear out and is never depreciable. Including the full purchase price in the depreciable basis overstates the deduction, and the IRS will disallow it on audit. Always split out the land value first.
Using the wrong recovery period. Residential rental is 27.5 years and commercial is 39 years. Using 27.5 on a commercial property, or vice versa, produces an incorrect schedule. A mixed-use property must allocate basis between the residential and commercial portions.
Forgetting the mid-month convention. The first year is not a full year. A property placed in service in July gets 5.5 months of depreciation, not 12. Claiming a full year in year one overstates the deduction and creates a basis error that compounds through the schedule.
Ignoring depreciation recapture at sale. Depreciation reduces your basis, and when you sell, the accumulated depreciation is recaptured at a maximum 25% federal rate under Section 1250. The deduction is not free money. Factor recapture into any sale analysis.
Frequently Asked Questions
What is the difference between residential and commercial rental depreciation?
Residential rental property uses a 27.5-year MACRS recovery period. Commercial property uses 39 years. The distinction is based on the property type and use, not the owner. A residential rental where 80% or more of the gross income is from dwelling units is 27.5-year. Office, retail, and warehouse are 39-year.
What is the mid-month convention and why does it matter?
The mid-month convention treats residential and commercial rental property as placed in service in the middle of the month it was actually placed in service. So a property placed in service in July gets a half-month of depreciation for July plus each full month after, totaling 5.5 months in the first year. It applies regardless of the actual day in the month.
Can I deduct closing costs in the basis?
Non-financing closing costs like legal fees, title insurance, recording fees, and transfer taxes are added to the basis and depreciated. Loan points, mortgage insurance, and financing costs are not added to the basis. Points may be deducted over the life of the loan separately.
What is bonus depreciation and does it apply to rental property?
Bonus depreciation applies to personal property and land improvements, not to the building itself. In 2026, bonus depreciation is 60% for qualified property. A cost segregation study can reclassify components like appliances, carpeting, and land improvements into shorter recovery periods eligible for bonus, but the 27.5-year building structure is not eligible.
What happens to depreciation when I sell the property?
Accumulated depreciation reduces your adjusted basis, which increases your gain on sale. The depreciation you claimed is recaptured under Section 1250 at a maximum 25% federal rate, while any remaining gain is capital gain at the long-term rate. A 1031 exchange can defer both the recapture and the capital gain if you reinvest in like-kind property.
Accuracy and Disclaimer
This calculator generates a MACRS straight-line depreciation schedule using the 27.5-year residential and 39-year commercial recovery periods and the mid-month convention per IRS Publication 946. It does not account for cost segregation, bonus depreciation on personal property, Section 179, short tax years, or mixed-use allocations. Depreciation rules are complex and fact-specific. This is not tax advice. Consult a licensed CPA or tax professional for your specific filing, especially for mixed-use property, cost segregation, or sale and recapture planning.
Conclusion
Depreciation is the engine of rental tax efficiency, but it is only one input. Run the full property economics with our Rental Property Cash Flow Calculator and estimate the eventual sale tax with the Capital Gains Tax Calculator, since depreciation recapture changes the net proceeds.
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