"Mastering Real Estate Asset Depreciation"

Asset depreciation in real estate helps property owners reduce taxable income by deducting wear and tear over time, with residential rental properties depreciated over 27.5 years and commercial properties over 39 years using straight-line methods. Non-depreciable assets like land and items with accelerated depreciation, such as appliances and furniture, are governed by IRS rules like MACRS—expert tax advice is recommended for compliance.


Depreciation of assets is an important concept for real estate professionals. It allows property owners to deduct the wear and tear on their assets over time, reducing taxable income. Below is a breakdown of key information regarding asset depreciation in real estate.
Category Description Depreciable Life Method
Residential Rental Property Buildings used for residential purposes that are rented out for income. 27.5 years Straight-line depreciation
Commercial Property Buildings used for business or commercial purposes. 39 years Straight-line depreciation
Land Land itself is not depreciable as it does not wear out or lose value over time. Not applicable Not applicable
Furniture and Fixtures Movable items such as desks, chairs, or cabinets used in the property. 5-7 years Accelerated depreciation (e.g., MACRS)
Appliances Items such as refrigerators, stoves, and washers used within rental properties. 5 years Accelerated depreciation (e.g., MACRS)
Improvements Renovations or upgrades made to the property, such as new roofing or landscaping. 15 years Accelerated depreciation (e.g., MACRS)
Notes:
  • Depreciation begins when the asset is placed in service, not when purchased.
  • The IRS requires real estate professionals to use the Modified Accelerated Cost Recovery System (MACRS) for depreciation.
  • Consult a tax advisor to ensure accurate calculations and compliance with tax laws.

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