Rental Depreciation Calculator
Calculate the annual depreciation deduction on a rental and the recapture tax owed when you sell.
Want to understand the concept, not just the number? Read The Real Estate Tax Guide and more below.
How it's calculated
Depreciation is one of the biggest tax advantages of owning a rental. The IRS lets you deduct the cost of the building over time, on the theory that it wears out, even though a well-kept property often rises in value. That paper deduction shelters your rental income from tax each year, which can turn a positive cash flow into a tax loss on paper.
Only the building depreciates, not the land, and residential rentals use a 27.5-year straight-line schedule. Take the default. A 400,000 dollar property with 80,000 dollars of land value has a 320,000 dollar building. Divided over 27.5 years, that is about 11,636 dollars of depreciation you can deduct every year against your rental income. Over 10 years you deduct about 116,364 dollars, which also lowers your basis in the property to about 283,636 dollars.
The catch comes at sale. All that depreciation is recaptured and taxed at up to 25 percent, higher than the long-term capital gains rate. On 116,364 dollars of depreciation that is about 29,091 dollars of recapture tax. It is still a good deal, since you deferred tax for years and deducted at your ordinary rate, but it is not free. A 1031 exchange can defer the recapture too. Use this to size your annual deduction and the recapture waiting at the end.
Assumptions
- Only the building depreciates, straight-line over 27.5 years for residential rentals. Land is excluded.
- Recapture at sale is taxed at up to 25 percent. This shows the deduction and recapture, not the full sale tax, which the 1031 Exchange and Capital Gains calculators cover.
Last updated: 2026-08-08
These assumptions follow our general methodology.
Frequently asked questions
How does rental property depreciation work?
You deduct the value of the building, not the land, over 27.5 years for a residential rental. Each year you claim about 1/27.5 of the building value against your rental income, which can shelter the income from tax even while the property appreciates.
Why can I only depreciate the building?
Because land does not wear out. The IRS only allows depreciation on assets that decline in usefulness over time, so you split the purchase price between land and building and depreciate only the building portion.
What is depreciation recapture?
When you sell, the depreciation you deducted is recaptured and taxed at up to 25 percent. It reverses the benefit you took over the years, though deferring tax and deducting at your ordinary rate usually still comes out ahead. A 1031 exchange can defer it.
Do I have to take depreciation?
Effectively yes. The IRS taxes recapture on the depreciation you were allowed to take, whether or not you actually claimed it. So skipping the deduction gives you the recapture tax with none of the yearly benefit, which is the worst of both.