Rental Property Depreciation Calculator

Property depreciation is much easier to understand when you know how to workout how much a property depreciates in a single year. 

To do this, you simply take the Cost Basis of the property (aka the purchase price of the property, minus the cost of the land) and divide it by the useful life of the property, which is 27.5 years in the case of residential property.

So, if the cost basis is $200,000 and the useful life is 27.5 years, to calculate the property depreciation for a single year = $200,000 / 27.5 = $7,272.73 

This isn’t a very complex calculation. You are simply dividing the property value by the depreciation time (in years) to work out the depreciation over a full year.

That’s the easy part. The tricky part is working out how much a residential rental property depreciates in the first year and the last year. We will now explain how this works in greater detail. 

To calculate rental property depreciation in the first year, determine which month it went into service, and then multiply the cost basis by the percentages in this table:

Please note – these percentages are based on a residential rental property, which has a useful life of 27.5 years. 

To calculate rental property depreciation in the last year, determine the last month of the property’s useful life, then multiply the cost basis by the percentages in this table

Please note – these percentages are based on a residential rental property, which has a useful life of 27.5 years. The percentages are different for a commercial property, which depreciates over a longer period (36 years).

Please note – these guidelines are for a residential rental property, which has a useful life of 27.5 years. When working with a commercial property, the last month in service is the same as the first month in service, albeit 39 years in the future.

The cost basis of a rental property is the purchase price of the property minus the cost of the land. This value is used to calculate depreciation over time. It is important to accurately determine this value, as it will directly affect how much you can deduct from taxes when filing your annual return. 

Once you know the cost basis of the rental property, you can then use this information to calculate depreciation over time. The IRS allows landlords to depreciate the cost basis of residential properties over a period of 27.5 years and the cost basis of commercial properties over 39 years. 

Please Note – You can use the calculator’s toggle button to switch from ‘residential’ to ‘commercial’. It automatically updates the useful life of the property when making the calculations. 

The useful life of a residential property is 27.5 Years

The useful life of a commercial property is 39 Years

Straight-line depreciation is a method of calculating the decline in value of an asset over a certain period of time. This depreciation calculation assumes that the asset, such as a rental property, declines in value by the same amount each year. With this calculator, you can easily determine how much depreciation has occurred on your rental property over the course of a given year and plan ahead for future investments accordingly.

To use the rental property depreciation calculator, simply enter in some basic information about your rental property. You just need to know:

• The cost basis (purchase price excluding the land)
• When the property went into service
• The type of rental property (ie residential or commercial)

Armed with these 3 pieces of information, the depreciation calculator for rental property will then tell you:

• The depreciation amount during the first year
• The depreciation amount during the last year
• The depreciation amount during every other year
• The final month of the property’s useful life
• A year-by-year breakdown of the depreciation expense

When a rental property goes into service, it means that the property is now available for rent and can be used as an income-generating asset. According to eisneramper.com:

The IRS considers the property placed in service when the following three elements are all provided:

1. Readiness
2. Availability
3. Capability to perform its intended function

When using this depreciation calculator for rental property, you can simply use the first month that the property was eligible to receive rent. If you are filing your taxes, you may need to consult with a tax advisor to be 100% certain of the first month in service, from a legal perspective.