Depreciation recovers the cost of the building — not the land — over 27.5 years for residential rental property under the MACRS general depreciation system, straight-line, using the mid-month convention (IRS Publication 527). The calculation needs three records: the basis (purchase price plus certain closing costs, less the land’s share, plus improvements), the date the property was placed in service (available for rent, not necessarily rented), and the allocation between building and land. Improvements are depreciated separately from their own placed-in-service dates; appliances and similar items have shorter recovery periods. The records are what a preparer asks for first, and what a sale will require years later.
The three records
| Record | Source | Note |
|---|---|---|
| Basis of the building | Closing statement; the basis file | Purchase price + capitalised closing costs − land |
| Land allocation | Appraisal-district record (land vs improvement values) or an appraisal | A common, defensible method is the appraisal district’s ratio at purchase; keep the record used |
| Placed-in-service date | Listing date, first lease, or the date the unit was ready and available | Starts the mid-month convention |
| Each improvement | Invoice, date completed, cost | Separate depreciation schedule per improvement |
| Prior depreciation taken | Prior returns | Reduces adjusted basis; recaptured on sale |
A worked example
A house bought for $250,000 with $5,000 of capitalised closing costs, where the appraisal district shows land at 20% of value: basis of the building $204,000; annual depreciation about $7,418 ($204,000 ÷ 27.5), with the first and last years prorated by the mid-month convention. A $12,000 roof installed later is depreciated from its own month over 27.5 years. Land is never depreciated.
What depreciation is not
- Optional in effect: on sale, gain is computed on the adjusted basis reduced by depreciation “allowed or allowable,” so unclaimed depreciation still reduces basis.
- A repair: repairs are deducted in the year paid; improvements are depreciated (IRS).
- A substitute for records: the placed-in-service date and the land allocation must be documented, not estimated in January.
Frequently asked questions
How many years is a rental house depreciated?
27.5 years for residential rental property under MACRS GDS, straight-line with the mid-month convention; land is not depreciated (IRS Publication 527).
How is land separated from the building?
By a reasonable allocation — commonly the appraisal district’s ratio of land to improvement value at purchase, or an appraisal — documented in the basis file.
Are improvements depreciated with the building?
Separately, each from its own placed-in-service date, over the applicable recovery period (IRS Publication 527).
Sources
Rules change and the right answer can depend on the home, the city, the lease and the timing. These are the official pages this guide relies on; check them before signing, charging a fee, sending a notice or making a legal decision.
- IRS Publication 527 (2025) — Residential Rental Property ↗
- IRS — Tangible property final regulations (de minimis, small taxpayer and routine maintenance safe harbors) ↗
- IRS — Tips on rental real estate income, deductions and recordkeeping ↗
General information for U.S. landlords, with a Texas focus. This guide is not legal, tax or accounting advice. Consult a qualified professional for your situation. Written by the rentalfreelease.com Editorial Team; last reviewed September 19, 2026.