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Calculate your depreciation
Federal tax rules for residential rental property placed in service by an individual landlord. Nothing you type is sent anywhere. An estimate, not tax advice: your tax preparer files the real numbers on Form 4562.
How rental depreciation works
The IRS treats a rental building as wearing out over 27.5 years. Under the general depreciation system you must use the straight line method and the mid-month convention, which counts the month the property is placed in service as half a month (IRS Publication 527). The land under it never wears out, so it is never depreciated.
- Start with your cost, plus closing costs that belong in basis, plus improvements made before renting.
- Subtract the land. Split the total between land and building by their fair market values. Publication 527's own example uses the property tax assessment, where the house was 85% of the assessed value and the land 15%.
- Divide the building basis by 27.5 for each full year. The first year is prorated by month.
Example
A $300,000 rental with $6,000 of closing costs that count toward basis and $60,000 of land value, ready to rent in July 2026. The depreciable basis is $246,000. The first year counts 5.5 months (half of July plus August to December), so the 2026 deduction is $4,100. Every full year after that is $8,945, and the last small amount falls in 2054.
First-year rate by month placed in service
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 3.485% | 3.182% | 2.879% | 2.576% | 2.273% | 1.970% | 1.667% | 1.364% | 1.061% | 0.758% | 0.455% | 0.152% |
Year 1 percentage of the depreciable basis, from IRS Publication 946 (2025), Table A-6. Each later full year is about 3.636% (the IRS table alternates 3.636% and 3.637% in later years because of rounding). The calculator reproduces this table for every month.
Closing costs: what counts
| Added to basis | Not added to basis |
|---|---|
| Abstract fees, legal fees, recording fees, surveys, transfer taxes, title insurance | Points and loan origination fees |
| Charges for installing utility services | Loan assumption fees, credit report, lender-required appraisal |
| Amounts the seller owed that you agreed to pay, such as back taxes or interest | Fire insurance premiums |
| Rent or other charges for occupying the property before closing |
Both lists from Publication 527 (2025). Loan costs are handled separately, not as part of the building's basis.
Rules that change the answer
- Depreciation starts when the property is ready to rent, not when a tenant moves in. Publication 527's example: a house ready for rent in July is depreciated from July even if it is not rented until September.
- Appliances, carpeting and furniture used in a residential rental are 5-year property, depreciated separately from the building.
- Improvements made later are separate property items with their own schedule. An addition to a rental is depreciated over 27.5 years from when it is placed in service.
- Depreciation lowers your basis for figuring gain or loss when you sell. Sales are covered in IRS Publication 544.
Keeping the books for the rental? See rental property accounting software compared.
Ready to file? See tax software for rental property that handles Form 4562.
Frequently asked questions
How do I calculate depreciation on a rental property?
Take the cost of the property plus closing costs that belong in basis and any improvements before renting, subtract the land value, and divide the building basis by 27.5. The first year is prorated using the mid-month convention.
Can you depreciate land?
No. IRS Publication 527 says land can't be depreciated because it generally doesn't wear out. Split your purchase price between land and building by their fair market values.
When does rental depreciation start?
When the property is placed in service, meaning ready and available to rent. A property ready in July is depreciated from July even if the first tenant arrives later.
What is the first-year depreciation for a rental placed in service in January?
3.485% of the depreciable basis, per IRS Publication 946 Table A-6. December is 0.152%. Every full year after the first is about 3.636%.
Are closing costs depreciable?
Some are. Title insurance, recording fees, transfer taxes, legal fees, surveys and abstract fees are added to basis and depreciated with the building. Loan costs such as points and lender-required appraisals are not part of basis.