Depreciation Calculator

Use this free Depreciation calculator to make better property management decisions. Enter your values below to get instant results.

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How to Use This Calculator

1 Enter the property purchase price
2 Enter land value (typically 15-25% of purchase)
3 Select property type (residential: 27.5 years, commercial: 39 years)
4 Click Calculate to see annual depreciation deduction
5 Use this deduction to reduce taxable income

Example Calculation

Residential rental purchased for $350,000 with $70,000 land value

Inputs:

Purchase: $350,000
Land: $70,000
Building: $280,000
Type: Residential

Result:

Annual Depreciation = $280,000 ÷ 27.5 = $10,182/year

Important Considerations

• Cost segregation studies can accelerate depreciation on components
• Bonus depreciation rules change frequently—consult a CPA
• REITs handle depreciation differently than direct ownership

Frequently Asked Questions

Depreciation is a non-cash tax deduction that reduces taxable income. The IRS allows you to deduct the cost of the building (not land) over its useful life—27.5 years for residential, 39 years for commercial.

No. Land doesn't depreciate. Only building and improvement value qualifies. Typical split: land is 15-25% of total purchase price. Use property tax assessment or appraisal to justify your allocation.

Depreciation must be "recaptured" at sale. The IRS taxes recaptured depreciation at 25% (as of 2024). This is separate from capital gains tax. A 1031 exchange can defer both depreciation recapture and capital gains.

Yes! Properties with positive cash flow can show a tax loss after depreciation. Example: $6,000 cash flow - $10,000 depreciation = -$4,000 taxable income. This "phantom loss" reduces your overall tax burden.