Rental Property Depreciation Calculator

Rental property depreciation spreads the cost of the building, not the land it sits on, across the years the structure is expected to remain in use. Land is excluded because it does not wear out: international accounting standards treat land as having an unlimited useful life, so only the produced structure on it is written down. The building value divided by the depreciation period gives the annual deduction figure.

Only the building depreciates, so the land share is removed first. A property where the building is 80% of the value leaves 80% of the price to spread across the period; a higher land share leaves less. On the default figures a 300,000 property with 20% land gives a 240,000 building value and an 8,727.27 annual deduction, while a 40% land share on the same price gives 6,545.45. The larger the building portion and the shorter the period, the higher the annual figure.

Whether depreciation can be deducted, the period used, and how it is treated when a property is sold all depend on the tax rules where the property is located. Some jurisdictions allow the whole building to be written down; others restrict deductions to fixtures and fittings such as appliances and furniture. The 27.5-year default here is one jurisdiction’s statutory recovery period for residential rental property, not a universal figure, which is why the period is an input rather than a constant. This calculator applies a straight-line method as a general illustration. A qualified professional can confirm the treatment for a specific property.

A worked example

Take a property price of 300,000, a land value of 20%, and a depreciation period of 27.5 years. The building portion is 240,000, and dividing it across 27.5 years returns 8,727.27 a year, or 727.27 a month. The land value of 60,000 sits outside the calculation entirely. Adjust any input and the result updates as you type, with no submit button and no reload.

What moves the number most

Three inputs, and they behave differently. Property Price scales everything proportionally: double it and every figure doubles. Land Value % removes a share before the division, so moving it from 20% to 10% lifts the annual deduction from 8,727.27 to 9,818.18, while moving it to 40% drops the figure to 6,545.45. Depreciation Period divides what is left, so a 20-year period gives 12,000.00 a year and a 40-year period gives 6,000.00.

One thing the period does not change is the Lifetime Total, which always equals the building value: a shorter period concentrates the same 240,000 into fewer years rather than creating more of it.

The formula behind this

Building value equals the price multiplied by one minus the land percentage. Annual depreciation equals that building value divided by the number of years in the period. The monthly figure is the annual one divided by twelve, and the lifetime total is simply the building value, since straight-line depreciation writes the whole amount down across the period with an equal charge each year.

Where this fits in planning

This is a what-if tool rather than a forecast. It helps to test ideas: what happens to the result as the property price or the land share changes. Running several sets of figures shows how sensitive the result is to each input, where a single set does not. The land share in particular is worth running at two values, since it is an estimate rather than a fact and it moves the deduction directly.

What this doesn’t capture

This is a simplified model that holds its assumptions constant. It applies straight-line depreciation only, so it does not model accelerated methods, component or fixture-level schedules, mid-year conventions, improvements added after purchase, or partial-year ownership. It takes no view on how the deduction interacts with other property expenses, on recapture when the property is sold, or on the rate at which any of it is taxed. The figure is one scenario under one method, and the treatment that actually applies depends on local rules.