Rental real estate is depreciated under MACRS on a 27.5-year (residential) or 39-year (commercial) straight-line schedule. This tool shows your annual deduction, accumulated write-off, and the tax it shelters over the holding period.
Every figure below is computed by the same MACRS formula the calculator uses. First-year half-month proration is ignored for simplicity (it changes the first year by a few hundred dollars).
Profile: A house bought for $350,000 total with $75,000 allocated to land.
Profile: A $220,000 building basis condo held for 3 years, 22% bracket.
Profile: A $275,000 building basis held past the 27.5-year schedule.
Profile: A $390,000 building basis commercial property held 10 years.
Profile: A $500,000 building basis in the 32% bracket.
Depreciation lets you recover the cost of the building (never the land) through annual deductions over its "useful life." Residential rental property uses a 27.5-year straight-line schedule under MACRS; commercial and non-residential property uses 39 years. The formula is simply:
Annual Depreciation = Building Basis ÷ Recovery Period
The building basis is the purchase price (plus certain closing costs) minus the land value. Land is not depreciable, so allocating a larger share to land reduces your annual deduction.
Real property uses a mid-month convention: you get half a month of depreciation in the month you place the property in service, regardless of the actual day. A property placed in service in June gets 6.5 months in year one, not 7. This calculator shows the full-year figure; the IRS tables adjust the first and final years.
Depreciation is not free money — it lowers your basis, so it increases your taxable gain when you sell. The IRS taxes the gain attributable to depreciation as unrecaptured Section 1250 gain at up to 25%, even if your regular long-term capital gains rate is 0% or 15%. Over a long hold, recapture can be the single largest tax cost of owning a rental.
Depreciation shelters rental income from tax without any cash leaving your pocket. A $275,000 building basis produces $10,000 of deductions every year — enough to wipe out the taxable portion of rent on a modest single-family home. Investors with W-2 income can often use up to $25,000 of rental losses (including depreciation) against ordinary income if they actively participate and their MAGI is under the phase-out.
A cost segregation study reclassifies parts of the building (carpet, fixtures, land improvements) into 5-, 7-, or 15-year property, front-loading depreciation dramatically. On a $500,000 building this can accelerate hundreds of thousands of dollars of deductions into the first few years. The trade-off is recapture: more depreciation now means more unrecaptured 1250 gain later. See the cost-segregation calculator for the comparison.
Rental losses are generally "passive" and can only offset passive income — unless you qualify for the $25,000 active-participation allowance (which phases out between $100,000 and $150,000 MAGI) or you are a real estate professional. High earners often find that depreciation deductions are suspended and carried forward rather than usable immediately.
⚠️ Important: This calculator provides a simplified straight-line estimate. It does not apply the exact IRS mid-month convention tables, bonus depreciation for qualified improvement property, cost-segregation reclassifications, or passive-loss limitations. Use it for planning, then confirm amounts with a tax professional or depreciation software.