Depreciation recovery periods for rental property assets

What depreciation does

IRS Publication 527 calls depreciation the way you recover your cost in income-producing property. Instead of deducting the purchase price of a rental in one year, you deduct part of it each year over a fixed recovery period.

Depreciation starts when the property is placed in service, which for a rental means ready and available for rent, even before a renter moves in. It ends when you have recovered your full basis or retire the property, whichever comes first.

Skipping depreciation does not help you. Your basis is reduced by the depreciation you deducted or could have deducted, which affects your gain when you sell.

Recovery periods at a glance

Table 2-1 of Publication 527 lists these general depreciation system (GDS) recovery periods for property used in rental activities:

• 5 years: appliances such as stoves and refrigerators, carpets, furniture used in rental property, computers and their peripheral equipment, office machinery, automobiles and light trucks.
• 7 years: office furniture and equipment such as desks and files, and property without a class life that the law has not placed in another class.
• 15 years: improvements to land such as roads, shrubbery and fences. Publication 946 adds sidewalks and bridges to this group.
• 27.5 years: residential rental buildings and their structural components, such as furnaces, water pipes and venting.
• Additions and improvements, such as a new roof: the same recovery period as the property improved.

Under the alternative depreciation system, a residential rental building uses 30 years, or 40 years if placed in service before 2018. A building counts as residential rental property only if 80% or more of its gross rental income for the year comes from dwelling units. Nonresidential real property, such as an office building or store, uses 39 years.

Land is not depreciable

You cannot depreciate land, because land does not wear out. When you buy a rental, split the price between the land and the building. If the purchase documents do not allocate it, Publication 527 says you can divide the cost based on the assessed values for real estate tax purposes. Certain land preparation costs closely tied to the building may be depreciable with it.

If you convert a former home into a rental, your depreciable basis is the lesser of your adjusted basis or the fair market value on the date you change it to rental use.

Conventions decide the first and last year

A convention sets how much depreciation you get in the year you place property in service and the year you dispose of it.

• Mid-month convention: required for residential rental and nonresidential real property. The property is treated as placed in service at the midpoint of the month.
• Half-year convention: the default for other property, such as appliances.
• Mid-quarter convention: applies instead of the half-year convention if more than 40% of the year's depreciable basis was placed in service in the last three months of the year.

Residential rental property uses the straight line method, which gives equal yearly deductions except in the first and last years. A building with a $275,000 depreciable basis gives about $10,000 a year in full years, with smaller amounts in the first and last years.

Improvements follow the asset they improve

An addition or improvement is depreciated as if it were separate property, using the recovery period that applies to the original property. A new roof or a bathroom addition on a rental house is recovered over 27.5 years from when it is placed in service. A replacement refrigerator is 5-year property. A new fence is in the 15-year group.

Keep each improvement on its own line in your depreciation schedule with its cost, date and recovery period.

Form 4562 and your records

The 2025 instructions for Form 4562 say you file it for depreciation on property placed in service during the tax year, among other cases. Later years can usually rely on your schedule.

• The closing statement and your land and building allocation.
• Invoices for each improvement and asset, with placed-in-service dates.
• Prior depreciation schedules and returns.

The IRS advises keeping property records until the period of limitations expires for the year you dispose of the property. Publication 527 notes that some depreciation errors can be fixed on an amended return, while others need a change in accounting method.

Faster write-offs for shorter-lived assets

Some 5-year and 15-year property may qualify for bonus depreciation, and a cost segregation study can identify parts of a building purchase that belong in those shorter classes. The building itself stays on its 27.5-year schedule.

This guide is general information, not tax advice. Confirm how these rules apply to your situation with a tax professional.

How Rentari helps

Rentari's accounting tracks fixed assets with depreciation entries alongside your chart of accounts, so each building, appliance and improvement has its own record. Rentari keeps the record; your preparer confirms the recovery period and method.

Sources and further reading

• IRS Publication 527 (2025): Residential Rental Property, chapter 2
• IRS Publication 946 (2025): How To Depreciate Property
• IRS Instructions for Form 4562 (2025): Depreciation and Amortization
• IRS Topic 704: Depreciation
• IRS: How long should I keep records?

Common questions