IRS 27.5-year straight line with the mid-month convention, land split and recapture estimate
Updated October 2026
Purchase price plus closing costs: the price plus the settlement costs Publication 527 lets you add to basis, such as title insurance, recording fees and transfer taxes (not loan costs like points). Land share: the part of the value that is land, from an appraisal or, as Publication 527 allows, the ratio on your property tax assessment. Improvements before renting are capital work done before the first tenant; later improvements get their own schedule. Month placed in service is when the unit was ready and available for rent, even if the first tenant came later. The result shows the building basis, each year’s deduction, the last year of the schedule and an estimate of depreciation recapture if you sell after the years you enter.
Residential rental property uses the General Depreciation System: straight line over 27.5 years with the mid-month convention, which treats the property as placed in service in the middle of its month. A full year is 1 ÷ 27.5 = 3.636%. In the first year you get (12.5 − month number) ÷ 12 of that: March is (12.5 − 3) ÷ 12 = 9.5 months, so 9.5 ÷ 12 ÷ 27.5 = 2.879%. On a $240,000 building that is $6,909, then $8,727 in each full year until the 27.5 years are used up, which takes 28 or 29 tax years depending on the starting month.
Publication 527’s own example: a house bought for $185,000 with $25,000 of land, placed in service in February. The basis is $160,000 and the first-year rate 3.182%, so the deduction is $5,091.
| Placed in service | Year-1 rate | Year 1 on a $240,000 building |
|---|---|---|
| January | 3.485% | $8,364 |
| February | 3.182% | $7,636 |
| March | 2.879% | $6,909 |
| April | 2.576% | $6,182 |
| May | 2.273% | $5,455 |
| June | 1.970% | $4,727 |
| July | 1.667% | $4,000 |
| August | 1.364% | $3,273 |
| September | 1.061% | $2,545 |
| October | 0.758% | $1,818 |
| November | 0.455% | $1,091 |
| December | 0.152% | $364 |
From year 2 on, the IRS table shows 3.636%, alternating with 3.637% in later years so the percentages total exactly 100. The calculator uses the exact 1 ÷ 27.5 fraction, which matches the table to within rounding.
| Situation | Depreciable basis | Year 1 | Full year | Depreciation over the years held |
|---|---|---|---|---|
| $300,000 duplex, 20% land, rented from March | $240,000 | $6,909 | $8,727 | $68,000 (8 years) |
| Condo bought for $220,000, worth $260,000 when converted in October, 25% land | $165,000 (lesser of basis or value, building share) | $1,250 | $6,000 | $43,250 (8 years) |
| $40,000 new roof added in June of year 3 (own 27.5-year schedule) | $40,000 | $788 | $1,455 | $8,061 (6 years) |
| $400,000 single-family, 25% land, rented from January, sold after 10 years | $300,000 | $10,455 | $10,909 | $108,636 (10 years; recapture up to $27,159) |
Land cannot be depreciated, so the cost must be split between land and building by their fair market values; if you are unsure, Publication 527 allows the property tax assessment ratio (its example: an assessment of $136,000 for the house and $24,000 for the land puts 85% of the price in the building). If you turn your own home into a rental, the basis for depreciation is the lesser of your adjusted basis or the fair market value on the conversion date, so a home that has fallen in value starts at the lower figure.
A repair (fixing a leak, repainting, replacing a broken window) is deducted in the year you pay it. An improvement (a new roof, an addition, a kitchen remodel, replacing the HVAC system) is depreciated on its own 27.5-year schedule starting the month it is placed in service, as in the roof row above. Appliances, carpets and furniture used in the rental are 5-year property under Publication 946 and use the regular MACRS tables in the depreciation calculator.
Depreciation lowers your basis, so it raises the gain when you sell. The part of the gain equal to the depreciation (unrecaptured section 1250 gain) is taxed at a maximum 25% rate, and the rest at the regular capital gains rates. The IRS counts depreciation "allowed or allowable", so skipping it does not avoid the tax on it. If the rental later becomes your home, the same depreciation cannot be excluded under the home-sale exclusion; see the home sale tax calculator.
Depreciation often turns a cash-positive rental into a tax loss. Rental losses are generally passive, but if you actively participate (own at least 10% and make management decisions such as approving tenants and repairs), Publication 527 lets you deduct up to $25,000 of rental loss against other income. That allowance phases out as modified AGI rises from $100,000 to $150,000 ($50,000 to $75,000 if married filing separately and living apart); disallowed losses carry forward.
Depreciating the land along with the building. Starting in the purchase month instead of the month the unit was ready for rent. Using the purchase price for a converted home when the market value at conversion was lower. Expensing an improvement as a repair, or the reverse. Forgetting depreciation for years and then facing recapture on depreciation you never took. Stopping the schedule after a vacancy: a unit held out for rent keeps depreciating.
It does not compute partial-year depreciation in the year of sale, the Alternative Depreciation System (30 years), cost segregation, bonus depreciation on qualifying components, short-term rentals treated as nonresidential, mixed personal use, or your full tax on a sale. A tax professional is worth it for a cost segregation study, a 1031 exchange, or a sale of a rental you also lived in.