📋 Property Details
$
$
%
IRS requires land to be separately valued — typically 15–25%
Accelerated depreciation — deduct more in early years
📊 Your Depreciation Deduction
$0
Annual Depreciation Deduction
⚡ Cost Segregation Acceleration (Est.)
Land (non-depreciable)
$0
Building (27.5 yr straight-line)
$0
Personal Property (5–7 yr accelerated)
$0
Year 1 Total Deduction (est.)
$0
Bonus Depreciation (first year)
$0
Depreciable Basis
$0
Purchase price minus land value
Monthly Depreciation
$0
Recovery period: 27.5 years
Total Depreciation
$0
Over full recovery period
Land Value (Non-depreciable)
$0
Required IRS separation
💡 Tax savings estimate: At a 24% marginal tax rate, this deduction saves you approximately $0 per year in federal taxes.
📅 Depreciation Schedule (First 5 Years)
| Year | Beginning Basis | Annual Depr. | Accumulated | Ending Basis |
|---|
* Mid-month convention applied for residential properties (IRS default). Schedule shown for first 5 years + year 27/39.
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❓ Frequently Asked Questions
How is rental property depreciation calculated?
Rental property depreciation is calculated by dividing the building's depreciable basis by its recovery period. The depreciable basis equals the purchase price plus closing costs minus the land value (which is never depreciable). For residential properties, the IRS sets a 27.5-year recovery period using the mid-month convention.
What is the depreciation period for residential rental property?
Residential rental property uses a 27.5-year straight-line depreciation schedule under Section 168 of the IRS code. Commercial properties use 39 years. Both use the mid-month convention, meaning depreciation begins in the month the property is placed in service.
Can I deduct depreciation even if I don't have taxable income?
Yes — passive activity loss rules allow rental real estate depreciation to generate a passive loss that can offset other passive income. If you have no passive income, the loss may be carried forward to future years. If you actively participate (10+ hours in rental activity), up to $25,000 of losses may be deductible against non-passive income (phased out at higher incomes).
What is cost segregation and how does it accelerate depreciation?
Cost segregation reclassifies building components into shorter depreciation periods. Personal property (appliances, carpeting, fixtures) depreciates over 5 or 7 years, land improvements (landscaping, driveways) over 15 years, and the building itself over 27.5 years. A cost segregation study can accelerate depreciation by 30–50% into years 1–5, creating larger tax deductions upfront.
How do I handle depreciation when I sell a rental property?
When you sell a rental property, all accumulated depreciation is "recaptured" and taxed as ordinary income at up to 25% (the Depreciation Recapture rate). Any gain above the recaptured depreciation is taxed as long-term capital gains. Properly timed cost segregation and 1031 exchanges can help manage recapture exposure.
What happens to depreciation when I convert a personal residence to rental?
When you convert a personal residence to rental property, you calculate depreciation based on the property's fair market value at the time of conversion (not the original purchase price). The accumulated depreciation from personal use is not recaptured — only the depreciation taken after conversion is subject to recapture rules when you eventually sell.