Calculate your annual depreciation deduction and see exactly how much tax you save each year. Depreciation is one of real estate's most powerful tax advantages.
Depreciation is your biggest non-cash tax deduction. The IRS allows you to deduct the cost of a rental property (building only, not land) over 27.5 years (residential) or 39 years (commercial). A $300,000 property with $50,000 in land value = $250,000 depreciable basis ÷ 27.5 years = $9,091/year tax deduction — even if the property is appreciating in value.
🏠 Property Details
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$
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Annual Depreciation Deduction
$0/yr
Tax savings: $0/year
Depreciable Basis
$0
Purchase + costs - land
Recovery Period
27.5 yrs
Straight-line method
Annual Tax Savings
$0
At your tax bracket
Monthly Tax Savings
$0
Effective cash benefit
Cumulative Depreciation Schedule
Year 1 Depreciation—
5-Year Cumulative—
10-Year Cumulative—
Tax Savings Over 10 Years—
Full Recovery Period—
Depreciation Recapture Rate at Sale25% (federal)
⚠️ Depreciation Recapture: When you sell, the IRS taxes recaptured depreciation at 25% (Section 1250 unrecaptured gains) — separate from your capital gains rate. A 1031 exchange defers both. Consult a tax professional for your specific situation.
Maximize your real estate tax strategy
A real estate-focused CPA can find additional deductions including cost segregation studies that accelerate depreciation. Use our tools to understand the numbers, then work with a pro.
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Frequently Asked Questions
How does real estate depreciation work? ▾
The IRS allows you to deduct the cost of a rental building (not land) over its 'useful life': 27.5 years for residential properties, 39 years for commercial. This is straight-line depreciation — the same amount each year. If your depreciable basis is $275,000, your annual deduction is $275,000 ÷ 27.5 = $10,000/year. This reduces your taxable rental income even if the property is appreciating in market value.
What is depreciable basis? ▾
Depreciable basis is the cost attributable to the building (not land) plus certain closing costs and improvements. It includes: purchase price minus land value, plus acquisition costs like title insurance, attorney fees, and recording fees. Land is never depreciable. You must allocate between land and building — either using the county assessor's ratio, an appraisal, or the purchase contract if it specifies. The IRS scrutinizes low land allocations.
What is cost segregation and should I use it? ▾
Cost segregation is a tax strategy where a specialized engineering firm reclassifies parts of a building (personal property, land improvements) from 27.5/39-year depreciation to 5, 7, or 15-year schedules. This accelerates deductions dramatically in early years. For a $1M+ property, a cost segregation study ($5,000-$15,000) can generate $50,000-$150,000 in accelerated first-year deductions. It's most powerful with large properties and bonus depreciation provisions.