Real estate tax education
Rental property depreciation
Depreciation spreads the cost of qualifying rental property over time. The deduction depends on what you own, its tax basis and when it is ready and available for rent—not just the purchase price.
Sources checked November 2, 2026. IRS publications linked below may cover earlier tax years; verify current-year guidance before filing.
What can you depreciate?
Generally, you must own the property, use it in business or to produce income, and expect it to have a useful life longer than one year. Land is not depreciable. Allocate purchase costs between land, the building and any separately classified assets using supportable values.
Residential rental buildings generally use straight-line MACRS over 27.5 years and the mid-month convention. Nonresidential real property generally uses 39 years. Alternative depreciation rules and specific assets can have different recovery periods.
When does rental depreciation start?
Depreciation generally begins when a property is placed in service: ready and available for rent. Buying a property or renovating one does not by itself establish that date. Keep evidence of availability, completion of work and rental use.
A simple building-only example
Assume a $400,000 rental purchase is supportably allocated as $100,000 land and $300,000 residential building basis, with no other basis adjustments. Dividing the building basis by 27.5 gives approximately $10,909 for a full recovery year. The first and final years use the applicable convention, so this is not the actual first-year deduction. Land produces no depreciation deduction.
Repairs, improvements and adjusted basis
Ordinary repairs may be currently deductible; betterments, restorations and adaptations generally must be capitalized. Capital improvements and depreciation allowed or allowable affect adjusted basis. Do not treat every renovation invoice as a current expense.
A deduction is not the same as usable savings
Personal use, at-risk rules and passive-activity loss limits may restrict a current deduction. Depreciation reduces basis and can affect gain and recapture consequences when property is sold. A 1031 exchange raises additional basis and deferral questions; it does not automatically eliminate those consequences.
Frequently asked questions
- Can I depreciate land?
- No. Land is not depreciable; use a supportable allocation between land and depreciable assets.
- Is depreciation based on my mortgage payment?
- No. Depreciation uses tax basis and the applicable recovery rules, not mortgage principal payments.
- Does the example show my first-year deduction?
- No. First-year depreciation depends on the placed-in-service date, convention, classification and applicable elections.
Primary sources and IRS guidance
Considering a 1031 exchange?
Request a personal 1031 consultation with , or start with your preliminary deadlines.
General U.S. federal tax education, not individualized tax, legal or investment advice. Examples use stated assumptions and do not promise deductions or savings. A consultation requires separate agreement; submitting a request does not establish a CPA-client relationship.