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Real Estate · Tax Planning
Rental Depreciation & Tax Shield Modeler
Depreciation is the deduction that makes a cash-flow-positive rental show a tax loss on paper. This modeler splits your purchase into land and building, runs the 27.5-year residential schedule with the mid-month convention, optionally layers in a cost segregation study with bonus depreciation on the short-life components, then tests the result against the passive activity loss rules and shows what the shield is actually worth to you. It also prices the recapture waiting at the other end.
Data version: 2026.07 · MACRS 27.5-year residential · bonus depreciation per OBBBA and IRS Notice 2026-11 · Rev. Proc. 2025-32 brackets
Property & Basis STEP 1
Title, recording, transfer tax. Loan fees are amortized separately and out of scope.
Use the assessor's land-to-improvement split. Land is never depreciable.
Added to the depreciable building basis
Mid-month convention treats it as the 15th regardless of the actual day
1 through 30
See the note below the button if you select the legacy variant
The literal per-spec formula only depreciates 27 years' worth of basis over 28 years (about 98.2% of the building basis for a January placement), regardless of placement month. It does not satisfy the requirement that depreciation sum to the building basis. Use it only to reproduce the original source document's numbers; use the corrected variant for anything you plan to rely on.
Cost Segregation, Optional STEP 2
Reclassifies part of the building into short-life property
Appliances, carpeting, decorative lighting
Land improvements: paving, fencing, landscaping
The volatile figure. Applies to the 5-year and 15-year components only, never to the building. OBBBA made 100% permanent for property placed in service after 19 Jan 2025.
Income & Tax Context STEP 3
NOI less mortgage interest. Bring it over from the deal screener.
Drives the 25,000 special allowance phase-out
If not living apart, the special allowance is 0, not 12,500
Required for the 25,000 special allowance. Unchecking removes it.
If true, losses are not passive at all and the limitation is skipped. Strict hour tests, heavily audited.
Sale, Optional STEP 4
Constants Panel EDITABLE
IRC 469(i), not indexed
Trailing decimals low confidence, verify against IRS Pub. 946
Total Depreciation This Year
--
27.5-year plus any cost segregation components
Total Tax Shield Value
--
Federal plus state, this year
Suspended Loss Carried Forward
--
Locked until passive income or a sale frees it
Land allocation is 100% of basis. Land is never depreciable, so depreciation is 0 across the board.
Land allocation is entered as 0%. The IRS expects a defensible allocation, usually from the assessor; verify this is correct.
The 5-year and 15-year shares entered summed above 100% of the building basis. Both were scaled down proportionally to fit.
Real estate professional status has strict hour tests and is heavily audited. This tool does not verify your eligibility.
The property is fully depreciated in year 28 and beyond under the 27.5-year schedule; the 27.5-year component contributes nothing further.
Married filing separately without living apart all year: the special allowance is 0, not 12,500.
Basis
Total basis--
Land basis, non-depreciable--
Building basis--
5-year property basis--
15-year property basis--
27.5-year property basis--
Depreciation This Year
Year 1 mid-month fraction applied--
Bonus depreciation taken--
27.5-year depreciation this year--
5-year depreciation this year--
15-year depreciation this year--
Total depreciation this year--
Passive Loss & Shield
Rental result after depreciation--
Loss offset by passive income--
Special allowance available after phase-out--
Allowed loss this year--
Suspended loss carried forward--
Federal tax shield value--
State tax shield value--
Total tax shield value--
Tax reduction from depreciation, no loss to limit--
Depreciation is a non-cash deduction. The cash flow from the rental is unchanged; only the tax bill moves.
Sale
Accumulated depreciation at sale--
Adjusted basis at sale--
Total gain on sale--
Unrecaptured section 1250 gain--
Recapture tax at 25%--
Long-term capital gain portion--
Long-term capital gain tax--
NIIT on sale--
Total tax on sale--
Lifetime net shield after recapture--
This is an illustrative estimate, not tax advice. Depreciation defers tax rather than eliminating it, and section 1250 recapture at 25% is the price at sale. Consult a CPA or tax attorney, especially before relying on a cost segregation study or claiming real estate professional status.