Rental Math
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Depreciation Calculator

How rental depreciation actually works year by year: straight-line schedules, the mid-month convention, cost-seg reclassification with 100% bonus depreciation, and the ADS election. Free planning estimate, no sign-up.

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Quick Answer

Depreciation Calculator estimates recovery period of 30 years and year-1 bonus depreciation of $0 for this scenario.

Key Takeaways

  • Depreciation Calculator estimates recovery period of 30 years and year-1 bonus depreciation of $0 for this scenario.
  • The alternative depreciation system (ADS) election lets a taxpayer depreciate residential rental property over 30 years instead of 27.5 — and the price of that election is steep: property under ADS is not eligible for bonus depreciation at all, and the longer life shrinks every year's deduction. On $1,000,000, ADS gives $33,333 per year versus $36,364 on the regular 27.5-year schedule — $3,030 less each year, every year, for three decades.
  • $3,030 per year: $33,333 annually over 30 years instead of $36,364 over 27.5 — plus the complete loss of bonus depreciation eligibility. Over five years ADS claims $166,667 versus $181,818 on the regular schedule.

Calculation Output

Recovery Period

30 years

Year-1 Bonus Depreciation

$0

Year-1 Building Depreciation

$33,333

Year-1 Total Deduction

$33,333

Year-2 Deduction (full year)

$33,333

Extra Year-1 vs Straight-Line

$0

Year-1 Tax Savings

$8,000

Total Depreciation, Years 1-5

$166,667

Result Chart

Recovery Period

30 years

Year-1 Bonus Depreciation

$0

Year-1 Building Depreciation

$33,333

Year-1 Total Deduction

$33,333

Year-2 Deduction (full year)

$33,333

Key Facts

Recovery Period30 years
Year-1 Bonus Depreciation$0
Year-1 Building Depreciation$33,333
Year-1 Total Deduction$33,333
Year-2 Deduction (full year)$33,333
Extra Year-1 vs Straight-Line$0

How This Estimate Works

  • The alternative depreciation system (ADS) election lets a taxpayer depreciate residential rental property over 30 years instead of 27.5 — and the price of that election is steep: property under ADS is not eligible for bonus depreciation at all, and the longer life shrinks every year's deduction. On $1,000,000, ADS gives $33,333 per year versus $36,364 on the regular 27.5-year schedule — $3,030 less each year, every year, for three decades.
  • Nobody elects ADS to get a bigger deduction. The election shows up where the tax code effectively requires it: taxpayers who elect out of the business-interest limitation under §163(j) must use ADS for their real property, and electing real-property trades or businesses face the same trade. In those contexts the question is not "ADS or 27.5" but "ADS or a capped interest deduction" — and the $3,030-a-year haircut is the cost of keeping the interest deduction uncapped.
  • The ADS election is also irrevocable once made for that property, and it applies to the building — land was never depreciable either way. Run the straight-line variant for this same $1M basis side by side with this page and the difference compounds: over the first five years ADS claims $166,667 while the regular schedule claims $181,818.
  • One more interaction worth knowing: because ADS property cannot take bonus depreciation, the cost-seg-plus-bonus strategy on the bonus variant page is entirely off the table under ADS — the reclassification still exists mechanically, but the 100% expensing that makes it valuable does not apply. The election trades away the front-loading game completely.
  • Year-1 tax savings at a 24% marginal rate are $8,000 under ADS — the number to compare against the straight-line page before deciding the election is worth its context. This is a planning estimate, not an engineered cost-segregation study and not tax advice. Bonus depreciation eligibility turns on the acquisition date — the property must have been acquired after January 19, 2025 for the restored 100% bonus — and state treatment of federal expensing often differs. A filing-grade answer needs a CPA who knows your return.

FAQ

What does the ADS election cost on $1,000,000?

$3,030 per year: $33,333 annually over 30 years instead of $36,364 over 27.5 — plus the complete loss of bonus depreciation eligibility. Over five years ADS claims $166,667 versus $181,818 on the regular schedule.

Why would anyone elect ADS if the deduction is smaller?

Usually because the tax code requires the tradeoff: taxpayers electing out of the §163(j) business-interest limitation must use ADS for real property. The election buys an uncapped interest deduction at the cost of slower depreciation — and it is irrevocable for that property.

Does the One, Big, Beautiful Bill change rental depreciation?

It permanently restored 100% bonus depreciation for property acquired after January 19, 2025. The 27.5-year building itself is unaffected — bonus applies to reclassified 5-year and 15-year property from a cost-segregation study, not to the building. The acquisition date, not the placed-in-service date alone, controls eligibility.

Is rental depreciation recaptured when I sell?

Yes — depreciation you claimed (or could have claimed) is recaptured at 25% on sale, up to the amount of gain. That is why the depreciation strategies on these pages pair naturally with 1031 exchanges, which defer the recapture tax along with the rest of the gain rather than paying it at closing.

Can I depreciate the land under my rental?

No. Land is never depreciable. Only the building and improvements recover cost through depreciation, which is why the purchase-price allocation between land and building — the first step of any cost-segregation study — determines everything downstream.

What is this $1M depreciation estimate not telling me?

It is a planning estimate, not tax advice: it cannot see your actual land allocation, passive-activity limits, at-risk rules, prior depreciation, or whether your state conforms to federal bonus treatment. Use it to decide whether a CPA conversation is worth having.

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