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Real Estate Depreciation Calculator Pro (USA)

Calculate your rental property’s annual depreciation, tax savings, cost segregation benefits & bonus depreciation — all based on current IRS MACRS guidelines for tax years 2024 and 2025.

27.5 / 39 YrRecovery Periods
MACRSDepreciation Method
IRS Pub 946Compliant Rules
1 Property Details
$
$
Land value cannot exceed purchase price.
$
Title fees, attorney fees, recording fees, etc.
2 Improvements & Timing
$
Roof replacement, HVAC, renovations, etc.
Enable Cost Segregation
Apply Bonus Depreciation
Per Tax Cuts and Jobs Act (TCJA) phase-down schedule. Applies to 5-year & 15-year property with cost segregation.
3 Tax Information
Select your highest federal income tax bracket. State taxes not included.

Current IRS Guidelines

27.5 YrRecovery Period
Straight-LineDepreciation Method
Mid-MonthConvention
40%Bonus Rate 2025
Yr 1 Yr 5 Yr 10 Yr 15 Yr 20 27.5 Remaining Book Value Decreases Over Time Book Value
Cost Segregation Breakdown 5-Year Property (15%) — Appliances, Carpet, Window Treatments 15-Year Property (10%) — Fencing, Paving, Landscaping 27.5 / 39-Year Property (75%) Structural Components — Foundation, Walls, Roof Fast Slow

Your Depreciation Results

Based on your property details and current IRS guidelines

Cost Basis Breakdown

Annual Depreciation Over Time

Depreciation Schedule

How Real Estate Depreciation Works in the USA

What Is Depreciation?

Depreciation is an IRS-allowed tax deduction that lets you deduct the cost of a rental property over its useful life. You don’t actually spend cash — it’s a “paper loss” that reduces your taxable rental income.

Under IRC Section 167, residential rental property is depreciated over 27.5 years and commercial property over 39 years using the straight-line method with mid-month convention.

Calculating Cost Basis

Your depreciable basis is NOT just the purchase price. It includes:

  • Purchase price of the property
  • Closing costs (title insurance, attorney fees, recording fees)
  • Capital improvements (roof, HVAC, renovations)

Land is NOT depreciable. You must subtract the land value from the total basis to get the depreciable amount.

Cost Segregation

A cost segregation study dissects your property into components with shorter recovery periods:

  • 5-year property (carpet, appliances, window treatments) — MACRS 200% DB
  • 15-year property (fencing, paving, landscaping) — MACRS 150% DB
  • 27.5/39-year (structural) — Straight-line

This front-loads depreciation, creating massive early-year tax savings and improving cash flow.

Bonus Depreciation

Under the TCJA, bonus depreciation allows you to deduct a large percentage of eligible property in Year 1. The phase-down schedule:

  • 2023: 80% bonus depreciation
  • 2024: 60% bonus depreciation
  • 2025: 40% bonus depreciation
  • 2026: 20% bonus depreciation
  • 2027+: 0% (expires)

Bonus depreciation applies to 5-year and 15-year property identified through cost segregation — NOT to the building structure itself.

Frequently Asked Questions

Real estate depreciation is an IRS tax deduction that allows property owners to deduct a portion of the building’s cost each year over its designated recovery period. Under IRC Section 167(a), residential rental properties are depreciated over 27.5 years and commercial properties over 39 years using the straight-line method. This deduction reduces your taxable rental income without requiring any actual cash outflow, making it one of the most powerful tax benefits available to real estate investors.
The formula is: Annual Depreciation = (Purchase Price + Closing Costs + Improvements – Land Value) ÷ Recovery Period. For example, if you buy a residential rental for $350,000 with $75,000 in land value, $8,000 in closing costs, and $15,000 in improvements, your depreciable basis is $298,000. Divided by 27.5 years, your annual depreciation is approximately $10,836. Use our calculator above for precise mid-month convention calculations.
No. Land is never depreciable under IRS rules because it does not wear out, get used up, or become obsolete. Per IRS Publication 946, you must allocate the purchase price between land and building. Common methods include using the property tax assessment ratio, a qualified appraisal, or the land-to-total-value ratio from comparable sales. If you cannot determine land value separately, the IRS may disallow your depreciation deduction entirely.
Cost segregation is an engineering-based study that identifies building components eligible for shorter depreciation periods (5-year and 15-year instead of 27.5 or 39 years). This front-loads deductions, potentially saving $30,000–$150,000+ in taxes in the first 5 years on a typical property. Studies typically cost $5,000–$15,000 and are generally worth it for properties valued above $300,000. The IRS requires studies to follow specific methodologies per IRS Cost Audit Techniques Guide (ATG).
Bonus depreciation under the Tax Cuts and Jobs Act (TCJA) is phasing down: 80% for 2023, 60% for 2024, 40% for 2025, 20% for 2026, and 0% starting 2027. This applies to qualifying property with a recovery period of 20 years or less — meaning 5-year and 15-year property identified through cost segregation. For example, with $50,000 in 5-year property and 40% bonus rate in 2025, you can deduct $20,000 in Year 1 before applying regular MACRS depreciation to the remainder.
When you sell a depreciated rental property, the IRS requires you to “recapture” all depreciation taken over the ownership period. Under IRC Section 1250, unrecaptured Section 1250 gain is taxed at a maximum rate of 25%, regardless of your ordinary income tax bracket. For example, if you claimed $100,000 in total depreciation and sell the property at a gain, up to $100,000 of that gain is taxed at 25%. This is why many investors use 1031 exchanges to defer both capital gains and depreciation recapture taxes.
While the IRS doesn’t force you to claim depreciation, you should always claim it. Here’s why: even if you don’t claim it, the IRS treats it as “allowed or allowable” — meaning when you sell, they’ll still assess depreciation recapture as if you had claimed it every year. By not claiming it, you lose the annual tax deduction but still owe the recapture tax upon sale. This is a lose-lose situation that no investor should accept.
The mid-month convention (required per IRS Publication 946 for real property) assumes the property is placed in service in the middle of the month, regardless of the actual date. If you place a property in service in January, you get 11.5 months of depreciation for that year. If placed in service in December, you only get 0.5 months. This means the timing of your purchase significantly impacts your first-year deduction. Our calculator handles this automatically based on your selected month.
Important Disclaimer: This calculator is designed for educational and estimation purposes only. It does not constitute tax advice, financial advice, or legal counsel. Depreciation calculations are based on IRS MACRS guidelines (Publication 946) and current tax law including the Tax Cuts and Jobs Act (TCJA). Actual depreciation may vary based on individual circumstances, IRS audit positions, and additional state-level rules. Always consult a qualified CPA or tax professional before making tax decisions. Tax laws are subject to change — verify current rates with the IRS.
Sources & References: IRS Publication 946 — How to Depreciate Property | IRC Section 167 — Depreciation | IRC Section 168 — Accelerated Cost Recovery System | IRC Section 1250 — Gain from Disposition of Depreciable Real Property | IRS Cost Segregation Audit Techniques Guide | Tax Cuts and Jobs Act (TCJA) of 2017

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