The short answer
Depreciation generally recovers the basis of qualifying rental assets over time. Land is not depreciable, and the recovery method depends on the asset, use, placed-in-service date and applicable rules.
On this page
Build an asset record
Retain closing documents, land and building allocation, improvement invoices and the date each asset became ready and available for rental use. Purchase date and placed-in-service date need not match.
Check eligibility before assigning a schedule: IRS Publication 946 generally requires ownership, business or income-producing use, a determinable useful life and a life extending beyond one year. A building's age or an invoice label alone does not establish an eligible basis or deduction.
Keep the schedule year to year
Track original basis, adjustments, prior depreciation and disposals. Have a preparer review conversions from personal use, mixed use and special depreciation provisions before using a generic calculator.
Example: a building allocation
For a hypothetical $275,000 depreciable residential building basis under a 27.5-year straight-line framework, the annual arithmetic is $10,000 before conventions and other adjustments. This is not a first-year deduction calculation, and it excludes land.
Separate tax basis, class life and recovery period
Basis is the amount used for tax calculations after applicable adjustments. Class life helps determine the asset's tax classification; recovery period is the time over which that basis is recovered. Accumulated depreciation totals earlier deductions. These terms are different from an asset's market value or remaining physical life. See IRS Publication 946.
Choose the applicable system and asset class
MACRS uses GDS unless ADS is required or elected. Residential buildings generally use straight-line depreciation with a mid-month convention. Other assets may follow different methods. Use Publication 527, Table 2-1, then verify the asset, use and service date.
| Asset | General GDS recovery period |
|---|---|
| Residential rental building | 27.5 years |
| Rental appliances, carpets and furniture | 5 years |
| Office furniture | 7 years |
| Depreciable roads, fences and shrubbery | 15 years |
| Land | Not depreciable |
Classify improvements separately; an invoice label alone does not establish tax treatment. Check current eligibility before using special allowances.
The residential-building mid-month convention treats a service-start or disposal as occurring at that month's midpoint. First and final years therefore differ from a full annual deduction; do not use a building half-year shortcut. Use the appropriate Publication 527 tables and filing-year instructions with the reviewed service date, basis and method.
Correct missed depreciation through the appropriate procedure
Gather prior returns and the asset schedule before changing an entry. Publication 946 distinguishes mathematical or posting errors from accounting-method changes. An amended return may apply; a method change generally requires IRS approval and Form 3115. Have the preparer determine the applicable procedure and deadlines. Do not assume an older error cannot be corrected or post a catch-up deduction without that review.
Keep receipts and reviewed schedules with your records. Rentari's report guide helps organize accounting information; this guide does not promise automated depreciation classification or tax filing.
Distinguish temporary idle periods from ending rental service
Publication 527 says rental property can continue to be depreciated while temporarily idle, including repairs after a tenant leaves. A vacancy alone does not establish permanent retirement. Depreciation ends when the depreciable basis is fully recovered or the property is retired from service; document a sale, personal-use conversion or other retirement for the preparer's final-year review.
For adjusted basis, allowed-or-allowable depreciation, gain classification, loss limits and proposed deferral, use the current special-situations tax guide. Retain prior schedules and actual use/disposition dates. A software status change does not calculate the deduction or decide gain treatment.
References and next steps
Use these references for the specific topic they cover. Local requirements and individual circumstances may differ.
Common questions
What if I skipped a depreciation deduction?
Review prior returns with your preparer. The correction route depends on the error and whether an accounting method was adopted.
How do straight-line and accelerated depreciation differ?
Straight-line spreads deductions evenly before conventions; accelerated methods allocate more earlier. Eligibility depends on the asset and rules.
Can fencing or landscaping be depreciated?
Some qualifying land improvements can be depreciable; maintenance and land itself are different. Verify classification before assigning a period.
Do I need a CPA or software to calculate depreciation?
Keep a verified asset schedule and apply current IRS instructions. Complex classifications, elections or corrections may warrant professional review.
Can I freely change from GDS to ADS?
No. Required ADS treatment, elections and correction procedures are different. An elected residential-rental ADS method is irrevocable; obtain reviewed guidance.
What is the ADS period for a residential rental building?
Generally 30 years for property placed in service after 2017. Earlier property generally uses 40 years, with a specified exception for an electing real property business; check Publication 527.
Does depreciation stop during an ordinary vacancy?
Temporary idle periods, including repair work after a tenant leaves, differ from retirement from rental service. Record the actual use and dates and have the preparer apply the applicable rule.
Is the 50% expense shortcut an IRS depreciation rule?
No. A budgeting estimate does not establish deductible costs, depreciable basis or a tax schedule. Use actual records and applicable tax rules rather than a fixed percentage of rental receipts.
Written and maintained by the Rentari team. Examples explain a decision; they are not customer results. This is general education. Confirm the rules and treatment for your property with a qualified local professional. Found an error or an unclear step? Send a correction with this page's address and the detail to review.
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