Rental property depreciation

You deduct the cost of a residential rental building, not the land, over 27.5 years using straight-line depreciation. A building basis of $240,000 gives about $8,727 a year. The first year is prorated by the month you placed the property in service, and the deduction goes on Schedule E, line 18.

The basics

• What's depreciable: the building and its improvements. Land is never depreciated.
• Recovery period: 27.5 years for residential rental property (MACRS, straight line).
• Convention: mid-month. The property is treated as placed in service in the middle of the month.
• Starts: when the unit is ready and available for rent, not when you bought it or when a tenant moves in.
• Form: Form 4562 in the first year; then the deduction goes on Schedule E, line 18.

Example

The July figure follows the IRS table rate of 1.667% for the first year (5.5 ÷ 12 ÷ 27.5).

Repairs vs improvements

A repair keeps the property in working order, like fixing a leak or patching drywall, and is deducted in full in the year you pay it. An improvement makes it better, restores it or adapts it to a new use, like a new roof or a kitchen remodel, and is depreciated, usually over 27.5 years. The de minimis safe harbor lets you expense items up to $2,500 per invoice or item if you elect it on your return.

Depreciation recapture

When you sell, the depreciation you took (or could have taken) reduces your basis. That part of the gain, called unrecaptured section 1250 gain, is taxed at up to 25%. You can't avoid it by skipping depreciation, so take it every year.

Records to keep

• Closing statement and how you split land and building.
• Receipts for every improvement, with the date placed in service.
• Yearly rent and expense totals per property, from your tenant ledger and Schedule E records.

Questions

Sources: IRS Publication 527, Residential Rental Property, and Publication 946, How to Depreciate Property (2025 editions), checked October 31, 2026. General information, not tax advice.