How is depreciation for a residential rental property typically calculated?

• A. 39 years
• B. 27.5 years
• C. 10 years
• D. 15 years

Answer: (B)

Depreciation for a residential rental property is calculated using the straight-line method over 27.5 years under MACRS. You must first separate the purchase price into land and building, since land isn’t depreciable. The annual depreciation is then the building portion of the basis divided by 27.5, typically using a mid-month convention for the month the property is placed in service. This means you deduct a steady portion of the building’s value each year, reducing taxable income. The 39-year period applies to nonresidential (commercial) property, while shorter periods like 10 or 15 years relate to other types of property or improvements, not standard residential rental property.