Real Estate Depreciation Calculator

Rental property loses value on paper each year, and that annual depreciation expense can lower the taxable income you report. This tool calculates that figure for both residential property, which carries a 27.5-year recovery period, and commercial property, which uses a 39-year recovery period. For investors mapping out 2026 tax filings, claiming the full deduction improves net cash flow and lifts overall returns.

Real property is depreciated under the Modified Accelerated Cost Recovery System (MACRS) straight-line method, the standard approach for real estate. The depreciable basis (purchase price minus land value) is divided by the applicable recovery period (27.5 years for residential or 39 years for commercial) to produce the annual depreciation amount. The first and last years use a mid-month convention, so depreciation reflects the number of full months the property was in service that year, counting half of the month it was placed in service or disposed of.

Land never depreciates, only the building and other improvements do, which trips up owners who run the entire purchase price through the formula and overstate their deductions. Getting the property type right matters just as much, since residential versus commercial classification drives the recovery period and the annual depreciation that follows.