Real Estate Depreciation Calculator
Straight-Line Depreciation
Calculate annual depreciation for residential or commercial property
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Partial Year (Mid-Month Convention)
Calculate first-year depreciation using the mid-month convention
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Formula
Annual Depreciation = (Purchase Price - Land Value + Improvements) / Useful Life. Residential = 27.5 years, Commercial = 39 years.
Frequently Asked Questions
How does real estate depreciation work?
The IRS allows you to deduct the cost of a rental property (minus land value) over its useful life: 27.5 years for residential and 39 years for commercial property. This is a paper deduction that reduces taxable rental income even though you haven't spent cash.
What is depreciation recapture?
When you sell a depreciated property, the IRS requires you to pay depreciation recapture tax on the total depreciation taken, at a maximum rate of 25%. This claws back some of the tax benefits you received during ownership.
What is cost segregation?
Cost segregation is an engineering study that reclassifies parts of a building (carpets, fixtures, landscaping) into shorter depreciation periods (5, 7, or 15 years instead of 27.5/39). This accelerates deductions and increases early tax savings.
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