Property Depreciation Calculator
Calculate annual MACRS straight-line depreciation for a rental property, accounting for land value and recovery period based on property type.
Result
Please check your inputs.
How to Use This Tool
Enter the total purchase price (cost basis) of your rental property, including any significant improvements but excluding closing costs.
Input the estimated land value — only the building structure depreciates, not the land.
Select your property type: Residential (27.5-year recovery period) or Commercial (39-year recovery period).
Click 'Calculate' to see your annual MACRS straight-line depreciation amount.
Review the result, which shows the yearly deduction you can claim on your tax return.
What Is Property Depreciation Calculator?
The Property Depreciation Calculator is a free online tool that helps real estate investors estimate the annual depreciation deduction for a rental property using the MACRS (Modified Accelerated Cost Recovery System) straight-line method. Depreciation allows you to recover the cost of a building over its useful life, reducing your taxable rental income and saving money on taxes. Land is never depreciable because it does not wear out, so this tool subtracts the land value from your total cost basis to calculate the depreciable amount. Understanding your annual depreciation is crucial for accurate tax planning, cash flow projections, and maximizing your rental property's after-tax return.
Formula
The tool uses the MACRS straight-line depreciation formula: Annual Depreciation = (Cost Basis – Land Value) ÷ Recovery Period. Cost Basis is the total purchase price plus qualifying improvements. Land Value is the portion of the purchase price attributable to the land (typically 10-30% of total value). Recovery Period is the number of years over which the property is depreciated: 27.5 years for residential rental property and 39 years for nonresidential commercial property. Straight-line means you deduct the same amount each year until the asset is fully depreciated.
Tips for Best Results
🏠 Know your property type — Residential (27.5 years) vs. Commercial (39 years) directly affects your annual deduction.
💰 Get a professional land appraisal or use the county tax assessor's land-to-building ratio to accurately separate land value from building value.
📅 Depreciation starts when the property is 'placed in service' (ready for tenants), not when you close escrow — keep records of the exact date.
🧮 Combine this calculator with a cost segregation study to accelerate depreciation on certain building components (though straight-line remains the base method).
Frequently Asked Questions
Can I depreciate the land under my rental property?
No, land is not depreciable because it does not wear out, become obsolete, or get used up. You must subtract the land value from the total cost basis before calculating depreciation. Only the building structure and improvements can be depreciated.
What happens to depreciation if I sell the rental property?
When you sell, any depreciation you claimed (or could have claimed) is recaptured as ordinary income up to a certain percentage (currently 25% for real estate). This is called depreciation recapture. The remaining gain is taxed as a capital gain. Keeping good records of your depreciation helps you estimate future tax liability.
Do I have to claim depreciation every year?
The IRS requires you to depreciate rental property placed in service during the year. If you fail to take the deduction, your basis is still reduced as if you had taken it, and you cannot 'catch up' in a later year unless you file an amended return. It is almost always beneficial to claim the full depreciation each year to lower your taxable income now.