Rental Property Depreciation, in Plain English
Depreciation is the deduction most new landlords don't understand and some forget completely. It's also one of the biggest. Here's how it works without the jargon.
The idea
The IRS treats a rental building as something that wears out over time. So instead of deducting what you paid for it all at once, you deduct a slice of the cost every year. For residential rental property, that's over 27.5 years.
Land doesn't count
Only the building depreciates. Land doesn't wear out, so you split your purchase price between land and building. Your county assessment usually shows a land value and a building value, and many people use that ratio as a starting point.
When it starts
Depreciation starts when the property is placed in service, meaning it's ready and available to rent. It doesn't have to be rented yet. If it's listed and ready on March 10, it's in service in March.
The mid-month convention
The IRS treats a rental as placed in service in the middle of whatever month it actually happened. So your first year gets a partial deduction. If you placed a property in service in March, you get 9.5 months of depreciation that first year.
A simple example
Say you paid $300,000, and $60,000 of that is land. The building is $240,000. Divide by 27.5 and you get about $8,727 a year. That's a deduction every year, even though you didn't spend that money that year. (Your first and last years are partial because of the mid-month convention.)
Improvements depreciate too
A new roof or HVAC system on a rental generally isn't deducted all at once. You add it to the property's basis and depreciate it too. That's why the repairs versus improvements line matters so much.
What happens when you sell
Depreciation lowers your basis. When you sell, the part of your gain that comes from depreciation you took is called unrecaptured section 1250 gain, and it can be taxed at up to 25%. You don't skip this by not claiming depreciation. The IRS treats it as allowed or allowable, so take it.
Keep your depreciation records for as long as you own the property and until the limitation period runs out for the year you sell. This is general information, not tax advice.
Common questions
How many years do you depreciate a rental property?
Residential rental property is depreciated over 27.5 years under the general system, using the mid-month convention.
Can you depreciate land on a rental property?
No. Only the building and improvements are depreciated. Land is not depreciable.
When does depreciation start on a rental?
When the property is placed in service, meaning ready and available for rent, even if no tenant has moved in yet.
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Sources checked October 2026:
General information for Georgia property owners, not legal, tax or insurance advice. Rules change, so check the official source or a professional before you act.