Depreciation Calculator Formula

Understand the math behind the depreciation calculator. Each variable explained with a worked example.

Use the Depreciation Calculator

Formulas Used

Annual Depreciation

annual_depreciation = building_value / recovery_period

Monthly Depreciation

monthly_depreciation = building_value / recovery_period / 12

Total Depreciation Over Recovery Period

total_depreciation = building_value

Variables

VariableDescriptionDefault
building_valueBuilding Value (Excluding Land)(USD)300000
recovery_periodRecovery Period(years)27.5

How It Works

Real Estate Depreciation for Tax Purposes

The IRS allows property investors to deduct the cost of buildings (not land) over a set recovery period using straight-line depreciation.

Formula

Annual Depreciation = Building Value / Recovery Period

Recovery Periods

  • Residential rental property: 27.5 years
  • Commercial property: 39 years
  • Land is never depreciable

    • Worked Example

    A residential rental property has a building value of $300,000 (excluding land) with a 27.5-year recovery period.

    building_value = 300000recovery_period = 27.5
    1. 01Annual depreciation: $300,000 / 27.5 = $10,909.09
    2. 02Monthly depreciation: $10,909.09 / 12 = $909.09
    3. 03Over the full recovery period, the entire $300,000 building value is depreciated

    Ready to run the numbers?

    Open Depreciation Calculator