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Depreciable Basis
Annual Depreciation Deduction
Monthly Depreciation Deduction
Note: This calculation uses the standard IRS 27.5-year straight-line depreciation method for residential rental property. Land is not depreciable.
Calculation Principles & Formulas
According to the IRS, residential rental property is depreciated using the MACRS straight-line method over 27.5 years. The calculation steps are:
Depreciable Basis = Total Purchase Price - Land Value + Capital Improvements
Annual Depreciation = Depreciable Basis ÷ 27.5
Monthly Depreciation = Annual Depreciation ÷ 12
Note: Land does not wear out, so it cannot be depreciated. Only the building and major improvements (e.g., a new roof, new HVAC system) can be depreciated. Routine maintenance and repair costs are generally deducted as expenses in the year they are incurred rather than capitalized.
