Depreciation on a Rental Property: What Small Landlords Miss

A rental building depreciates over 27.5 years, but appliances, carpet and paving can use 5- and 15-year lives and bonus depreciation. How it works.

By Seayora Editorial Team · Published October 23, 2026 · Facts checked October 23, 2026 · 4 min read

Short answer: You can deduct the cost of a residential rental building, but not the land, over 27.5 years, starting the month the unit is ready to rent. Many small landlords under-claim by depreciating the whole property as one 27.5-year asset: appliances, carpet and furniture are usually 5-year property and driveways, fencing and landscaping 15-year property, and those shorter-lived parts can qualify for 100% bonus depreciation.

Key takeaways

Land is never depreciated, so split the purchase price between land and building first.
The building is 27.5-year property, depreciated straight-line under the mid-month convention.
Five- and fifteen-year components acquired after January 19, 2025 can qualify for 100% bonus depreciation.
Depreciation reduces your basis whether you claim it or not, and it is taxed back when you sell.

What can you depreciate on a rental property?

You depreciate the building and the improvements you make to it, never the land under it. Your starting point, your basis, is generally what you paid for the property plus certain settlement costs, minus the value of the land. A common way to split land from building is your county assessor’s land-to-total ratio; an appraisal is better when you have one. The rules are in IRS Publication 527.

Depreciation starts when the property is placed in service, meaning ready and available to rent, whether or not a tenant has moved in. It stops when you have recovered your basis or take the property out of service.

How long is the depreciation period?

Recovery periods under the General Depreciation System (IRS Publications 527 and 946).
What it is	Recovery period	Examples
Residential rental building	27.5 years	The structure, roof, walls, plumbing and wiring
Personal property used in the rental	5 years	Appliances, carpet and furniture
Land improvements	15 years	Driveways, fencing, landscaping and outdoor lighting

Residential rental buildings use the straight-line method and the mid-month convention, so the first year is a partial year that depends on the month the property was placed in service. IRS Publication 946 has the percentage tables.

Why does the 5- and 15-year property matter?

Shorter-lived property can qualify for bonus depreciation, and the One, Big, Beautiful Bill made 100% bonus depreciation permanent for qualified property acquired after January 19, 2025 (IRS guidance on Notice 2026-11). That lets you deduct those components in the year they are placed in service instead of over five or fifteen years. The 27.5-year building itself does not qualify.

How do you find the 5- and 15-year property?

That is what a cost segregation study does: it breaks the purchase price into components and assigns each one its IRS recovery period. The IRS explains how it examines these studies in its Cost Segregation Audit Techniques Guide (Publication 5653), and a study is only as good as the documentation behind it. Studies for single-family and small multifamily rentals are offered by specialist firms such as Cost Seg Smart, without the cost of a full engineering visit.

Can you use the deduction this year?

Rental losses are generally passive. If you actively participate, for example by approving tenants, setting the rent and approving repairs, up to $25,000 of rental loss can offset other income, phasing out as modified adjusted gross income rises from $100,000 to $150,000 (IRS Publication 925). Real estate professionals, and short-term rentals with an average stay of seven days or less where you materially participate, are treated differently. Losses you cannot use carry forward.

What happens when you sell?

Depreciation lowers your basis, so part of it is taxed back on sale. Gain from depreciation on the building is taxed at up to 25%, and depreciation on 5-year personal property is recaptured as ordinary income. Accelerating deductions is usually still worthwhile because of the time value of money, but it is a timing benefit, not a permanent one.

One rule surprises people: your basis is reduced by the depreciation you were entitled to take, even in years you did not take it. Skipping depreciation does not avoid recapture; it only loses the deduction.

Where does depreciation go on your return?

Depreciation is figured on Form 4562 and carried to Schedule E, line 18. If you keep your books in Seayora, the Tax Center gives your preparer rent and expenses by property and by Schedule E line; add the depreciation schedule from your preparer or your study and the file is complete.

Frequently asked questions

Can I depreciate the land?

No. Land does not wear out, so it is never depreciated. Only the building and the improvements on it are, which is why the first step is splitting your basis between land and building.

What if I did not take depreciation in earlier years?

Your basis is still reduced by the depreciation you were entitled to. If you missed it for two or more years, the usual fix is an accounting method change on Form 3115 rather than amended returns; your preparer can confirm which applies.

Is a cost segregation study worth it for a small rental?

It depends on what you paid for the building, how long you plan to hold it and whether you can use a larger deduction this year. Ask your preparer to run the numbers before you order one.

Sources

How Seayora helps

The Tax Center for landlords: Rent and expenses by property and by Schedule E line, ready to hand to your preparer.

This article is general information, not tax advice. Tax rules change and your situation is your own, so confirm the treatment with a CPA or enrolled agent before you file.

How we write and check these guides: editorial standards.

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The Tax Center for Landlords and Management Companies — Documentation. Your Schedule E by property, what the rentals add to your federal tax, owners’ year-end statements and 1099-MISCs, your 1099s and every deadline — from the records already in Seayora.
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