Step 1: Find the building basis
Subtract the land value from your purchase price. Only the building depreciates — land does not wear out, so it's never depreciable.
Step 2: Pick the recovery period
Residential rental property uses a 27.5-year straight-line schedule; commercial property uses 39 years.
Step 3: Divide
Annual depreciation = building basis ÷ recovery period. Example: a $300,000 residential rental with $60,000 land has a $240,000 building basis; $240,000 ÷ 27.5 = about $8,727 per year.
Frequently asked questions
What is the depreciation period for a rental?
27.5 years for residential rental property, 39 years for commercial.
Can I depreciate the land?
No. Only the building and improvements are depreciable.
How do I find the land value?
Many investors use the county assessor's land-to-building ratio to support a reasonable split.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.