Rental Property Depreciation

K-04

Estimate annual depreciation on residential rentals using the 27.5-year MACRS schedule.

Property inputs

Purchase price

Land value

Land never depreciates. County assessments and appraisals usually split it out.

Capitalized costs

Closing costs, attorney fees, and immediate improvements added to the basis.

Placed in service

The month the property is ready to rent, not the closing date if you renovated first.

Marginal tax rate

Combined federal and state rate. Passive activity rules may suspend rental losses.

This building lets you deduct $8,945N2 a year for 27.5 years, worth $2,147N4 a year in tax at a 24% rate.

Plan K-04Placed in service in January: $8,573 in the first tax year. $60,000 of land never depreciates. Estimates, not tax advice.

Depreciable basisN1: $246,000; building plus capitalized costs
Per monthN2: $745; straight line
First tax yearN3: $8,573; in service from January
Tax saved, all yearsN4: $59K; at 24%

Recovering the basis over 27.5 years

IRS Table A-1, mid-month convention

Full depreciation schedule

Every tax year, computed live

Tax year	Rate	Deduction	Recovered	Tax saved
1	3.485%	$8,573	$8,573	$2,057
2	3.636%	$8,945	$17,518	$2,147
3	3.636%	$8,945	$26,464	$2,147
4	3.636%	$8,945	$35,409	$2,147
5	3.636%	$8,945	$44,355	$2,147
6	3.636%	$8,945	$53,300	$2,147
7	3.636%	$8,945	$62,245	$2,147
8	3.636%	$8,945	$71,191	$2,147
9	3.636%	$8,945	$80,136	$2,147
10	3.636%	$8,945	$89,082	$2,147
11	3.636%	$8,945	$98,027	$2,147
12	3.636%	$8,945	$106,973	$2,147
13	3.636%	$8,945	$115,918	$2,147
14	3.636%	$8,945	$124,864	$2,147
15	3.636%	$8,945	$133,809	$2,147
16	3.636%	$8,945	$142,755	$2,147
17	3.636%	$8,945	$151,700	$2,147
18	3.636%	$8,945	$160,645	$2,147
19	3.636%	$8,945	$169,591	$2,147
20	3.636%	$8,945	$178,536	$2,147
21	3.636%	$8,945	$187,482	$2,147
22	3.636%	$8,945	$196,427	$2,147
23	3.636%	$8,945	$205,373	$2,147
24	3.636%	$8,945	$214,318	$2,147
25	3.636%	$8,945	$223,264	$2,147
26	3.636%	$8,945	$232,209	$2,147
27	3.636%	$8,945	$241,155	$2,147
28	1.970%	$4,845	$246,000	$1,163

Educational estimate, not tax advice. Depreciation is recaptured (generally at up to 25%) when you sell, and passive activity rules may suspend losses. Confirm your basis and schedule with a CPA using IRS Publication 946.