How this number is made
Residential rental buildings are commonly depreciated on a 27.5-year straight line. Land is not depreciated, so it has to be out of the number before you start. This page divides the building by the years. It is not the mid-month MACRS table, which trims the first and last year. Do not file this number as if it were the table.
- Subtract land. A tax assessment split is one way people estimate it. It is not always what the return should use.
- Leave 27.5 unless you have a reason. Commercial property is often 39 years.
Formula
Annual depreciation = building ÷ years.
Worked example
With the figures already in the form, straight-line per full year is $10,000.
Questions
Why isn’t the first year smaller?
Because this is straight division, not the mid-month convention. The real first year is usually a partial year.
What happens when I sell?
Depreciation taken can be taxed back as unrecaptured gain. This page stops at the annual deduction.