Rental taxes & depreciation

How much depreciation you get, whether the paper loss cuts your tax this year, and what comes back when you sell.

Purchase price

Land share of the price (from the tax bill: Land ÷ Land + Improvements)estimate

Rental profit or loss before depreciation (rent − all expenses − mortgage interest, per year; type a minus for a loss)

$/yr

Your household MAGI (roughly your AGI, before rental losses)

$/yr

Filing status

More options

Taxable income without the rental (after deductions; sets your tax bracket)

$/yr

Closing costs + upgrades (added to basis)

Month rented out (1–12, first year)

Years you plan to hold (for the recapture estimate)

years

Your role

Real estate professional (IRS): more than half your work time and over 750 hours a year in real estate, plus material participation. A W-2 job usually rules it out.

Tax saved by depreciationestimate

$0 /yr

Depreciation per yearBuilding only ÷ 27.5 years. Land never depreciates.$0
First-year depreciation$0
Building value (depreciable)(price + basis add-ons) × (1 − land %)$0
Rental result after depreciationWhat Schedule E shows. Minus = loss on paper.$0
Loss you can use this year$0
Loss carried forwardNot lost. Used in later years or when you sell.$0
Federal tax saved$0
California tax saved$0

When you sell

Depreciation taken$0
Federal recapture taxOrdinary rates, capped at 25% (unrecaptured §1250)$0
California on that partCA taxes it as regular income$0

Estimate only, not tax advice. Uses 2026 federal brackets and the 2025 California schedule (latest published). California rules can differ from federal. NIIT, AMT, credits and other income are left out. Ask a CPA before you file.

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Next step

Not sure of the profit before depreciation? Run rent, expenses and loan in T146.
Pull the property tax bill. The Land vs Improvements split there is the number your CPA will likely use.
Thinking of selling later? See how a 1031 exchange defers the recapture: T222.
Rents below market? See how fast the law lets you catch up: T266.

Many people get this wrong: "My rental shows a loss, so it cuts my W-2 tax." Only if your MAGI is under $150,000 (and fully only under $100,000). Above that the loss is parked, not gone. And depreciation you skip still gets taxed when you sell, because the IRS counts what was "allowable."