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Estimate standard 27.5-year depreciation, bonus depreciation, and cost segregation scenarios for a rental. Every assumption is shown, and every number updates as you type.
Standard annual depreciation
$11,636.36
Building basis $320,000 / 27.5. No cost seg, no bonus.
Year-one deduction, your scenario
$1,454.55
Year one with no cost seg
$1,454.55
Difference: $0.00
Estimated tax value (before passive loss limits)
$465.45
Year-one deduction x 32%
Deductions, years 1 to 5
| Year | 27.5-year | 5-year | 15-year | Bonus | Total |
|---|---|---|---|---|---|
| 2026 | $1,454.55 | $0.00 | $0.00 | $0.00 | $1,454.55 |
| 2027 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2028 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2029 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2030 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2031 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2032 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2033 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2034 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2035 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2036 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2037 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2038 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2039 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2040 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2041 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2042 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2043 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2044 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2045 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2046 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2047 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2048 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2049 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2050 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2051 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2052 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2053 | $11,636.36 | $0.00 | $0.00 | $0.00 | $11,636.36 |
| 2054 | $4,363.64 | $0.00 | $0.00 | $0.00 | $4,363.64 |
Assumes the half-year convention for 5- and 15-year property. If more than 40% of that property is placed in service in the last quarter of the year, the mid-quarter convention may apply and results will differ. General information, not tax advice.
See cash flow, returns, and after-tax yield for this property in RentYield.
The IRS lets you deduct the cost of a rental building over time, because buildings wear out. For residential rental property, that period is 27.5 years. The basic formula is your depreciable basis (purchase price, plus certain closing costs and improvements, minus land) divided by 27.5.
Say you buy a rental for $400,000 and the land is worth $80,000. Your building basis is $320,000. Divided by 27.5 years, that's about $11,636 of depreciation a year. Your first year is prorated based on the month the property is placed in service: a rental placed in service in January gets about $11,152 in year one, and one placed in service in December gets about $485.
Land. The IRS doesn't allow depreciation on land because it doesn't wear out or get used up. That's why splitting your purchase price between land and building matters so much.
Depreciation starts when the property is placed in service, meaning it's ready and available for rent, even if it isn't rented yet. It doesn't start at closing. A property that's still being renovated on December 31 generally isn't placed in service that year.
Under the One Big Beautiful Bill Act, 100% bonus depreciation is permanent for qualified property acquired and placed in service after January 19, 2025. Taxpayers can elect 40% instead for the first tax year ending after that date.
Bonus depreciation doesn't apply to the building itself, which is 27.5-year property. It applies to qualified property with a recovery period of 20 years or less. In a rental, that includes appliances, carpeting, and furniture (5-year property) and items like fences and roads (15-year property).
A cost segregation study is an engineering-based analysis that identifies which parts of your purchase are shorter-life property instead of 27.5-year building. The more that's reclassified, the more can qualify for bonus depreciation in year one. Whether a study is worth its cost depends on the property and your tax situation, so talk to your CPA and a cost segregation provider.
There's no official number. The IRS's Cost Segregation Audit Techniques Guide says every situation depends on its specific facts. What exists are ranges published by cost segregation firms from their own studies. For single-family rentals, those ranges mostly fall between about 20% and 35% of building basis. Furnished short-term rentals tend to run higher because furniture and fixtures are 5-year property. Condos run lower because the owner usually doesn't own the land improvements.
The Low, Typical, and High scenarios in this calculator are drawn from those published ranges. Treat them as a way to see whether a study might be worth pricing out, not as a prediction for your property.
Cap rate ignores taxes. Two properties with identical rent and expenses can produce very different after-tax returns depending on the land-to-building split, how much qualifies as shorter-life property, and when each is placed in service. That's the gap RentYield is built to show.
Residential rental buildings are depreciated over 27.5 years using the straight-line method. Land is not depreciable.
No. Only the building and other improvements can be depreciated.
When the property is placed in service, meaning it's ready and available for rent. It doesn't need to have a tenant yet.
Yes, for qualified property acquired and placed in service after January 19, 2025. It applies to property with a recovery period of 20 years or less, such as appliances, carpeting, and furniture, not to the 27.5-year building itself.
Items like appliances and furniture can be separated without a full study, but a cost segregation study is the usual way to identify and support larger reclassifications. Ask your CPA what's appropriate for your property.
Published by cost segregation firms; ranges vary by firm and methodology.
This calculator and the information on this page are for general educational purposes only and are not tax, legal, or accounting advice. Depreciation rules are complex and depend on your specific facts, including passive activity rules that may limit your deduction. Consult a qualified tax professional before making decisions.