Real estate depreciation lets you deduct the cost of a building over its useful life — 27.5 years for residential property. It's a "phantom expense" that reduces your taxable income without costing a dime.
Annual Depreciation
$8,727
$727/mo
What does this mean?
You're getting meaningful tax savings from depreciation. This phantom expense reduces your taxable rental income without costing you anything out of pocket.
Depreciation is one of the most powerful tax benefits of owning rental property. The IRS allows you to deduct the cost of a building (not land) over its useful life — 27.5 years for residential and 39 years for commercial property.
This is called straight-line depreciation because you take equal deductions each year. It's a "paper loss" — your property might be appreciating while you claim it's losing value. That phantom expense offsets rental income and reduces your tax bill.
🏠 Residential
27.5-year useful life. Applies to single-family rentals, duplexes, apartments, and any property where 80%+ of revenue comes from dwelling units.
🏢 Commercial
39-year useful life. Applies to offices, retail, industrial, and mixed-use properties that don't qualify as residential rental.
Depreciation recapture: When you sell, the IRS "recaptures" depreciation at a 25% rate. But strategies like 1031 exchanges can defer this indefinitely. Use our 1031 Exchange Calculator and Cost Segregation Calculator for advanced depreciation strategies.
Keep running the numbers
Depreciation is the silent return. See how it compounds.
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