Rental Property Adjusted Basis Calculator
Enter the purchase allocation, capital costs, service dates, later improvement, and depreciation claimed to estimate adjusted basis. The calculator applies straight-line MACRS depreciation with the mid-month convention for residential rental or nonresidential real property.
Adjusted property basis$274,157.27
- Original total cost basis
- $321,000.00
- Allocated land basis
- $61,200.00
- Depreciable building basis
- $259,800.00
- Calculated depreciation allowed or allowable
- $46,842.73
- Depreciation reduction used
- $46,842.73
- Depreciation for calculation year
- $9,447.27
- Remaining depreciable basis
- $212,957.27
Year-by-year depreciation schedule
| Year | Building depreciation | Improvement depreciation | Cumulative depreciation | Ending adjusted basis |
|---|---|---|---|---|
| 2,022 | $9,053.64 | $0.00 | $9,053.64 | $311,946.36 |
| 2,023 | $9,447.27 | $0.00 | $18,500.91 | $302,499.09 |
| 2,024 | $9,447.27 | $0.00 | $27,948.18 | $293,051.82 |
| 2,025 | $9,447.27 | $0.00 | $37,395.45 | $283,604.55 |
| 2,026 | $9,447.27 | $0.00 | $46,842.73 | $274,157.27 |
Uses 27.5-year straight-line MACRS depreciation with the mid-month convention.
The schedule shows calculated allowable depreciation; the adjusted basis result uses claimed depreciation instead when it is higher.
How to use this calculator
- Choose the property type so the calculator uses the 27.5-year or 39-year recovery period.
- Enter purchase price, capitalized acquisition costs, land allocation, and pre-rental building improvements.
- Enter the placed-in-service date, any later structural improvement, and the year or sale month for the basis calculation.
- Add depreciation actually claimed and other basis adjustments, then compare adjusted basis with the depreciation schedule.
How adjusted basis is calculated
Adjusted basis starts with what was paid for the property, separates nondepreciable land, adds capital improvements, and subtracts depreciation allowed or allowable. For a rental building, the depreciation reduction can matter even when the owner did not claim the full amount on prior returns.
The calculator first allocates the purchase price and capitalized acquisition costs between land and the building. Let P be purchase price, C be capitalized acquisition costs, L be the land value included in the purchase price, and Q be building improvements completed before rental use.
land ratio = L ÷ P
land basis = (P + C) × land ratio
building basis = (P + C) × (1 - land ratio) + Q
Residential rental property uses a 27.5-year recovery period. Nonresidential real property uses a 39-year recovery period. This calculator applies straight-line MACRS depreciation with the mid-month convention to the original building basis and, if entered, to one later structural improvement using the same recovery period.
For each depreciable asset, the cumulative depreciation is:
depreciation = basis × min(eligible months ÷ (12 × recovery years), 1)
At the end of a tax year, eligible months run from the midpoint of the placed-in-service month through the end of that year. For a disposition month, eligible months run midpoint to midpoint, so a property placed in service and disposed of in the same month has zero depreciation in this implementation.
The basis reduction is the greater of calculated allowable depreciation and depreciation actually claimed, capped at total depreciable basis:
depreciation reduction = min(building basis + improvement basis, max(allowable depreciation, claimed depreciation))
Adjusted property basis is then:
adjusted basis = max(0, land basis + building basis + later improvement + other increases - other decreases - depreciation reduction)
What moves the result most
The largest drivers are the documented land allocation, the placed-in-service date, and whether prior depreciation was missed or overstated. A higher land allocation increases nondepreciable basis and reduces annual depreciation. A later placed-in-service month lowers first-year depreciation under the mid-month convention. Claimed depreciation above the computed allowable amount also reduces basis, but never below the total depreciable basis entered here.
What this calculator leaves out
This tool is limited to post-1986 residential rental or nonresidential real property using the standard MACRS treatment. It does not handle inherited or gifted property, personal-to-rental conversions, partial business use, short tax years, ADS, prior 1031 exchanges, involuntary conversions, cost-segregation components, appliances, furniture, land improvements, taxable gain, depreciation recapture, suspended passive losses, or tax owed.
Worked example
Suppose a residential rental property was bought for $300,000, with $6,000 of capitalized acquisition costs, $60,000 allocated to land, and $15,000 of building improvements completed before rental use. The property was placed in service in January 2022 and the owner wants adjusted basis at the end of 2026.
The land ratio is 20%. Land basis is $61,200. Depreciable building basis is $259,800: 80% of the $306,000 purchase-and-acquisition-cost total, plus $15,000 of pre-service improvements. Over 59.5 eligible months on a 27.5-year recovery period, calculated allowable depreciation is about $46,843. With no additional claimed depreciation or other adjustments, adjusted property basis is about $274,157.
Common questions
What is the adjusted basis of a rental property?
Adjusted basis is the property basis after tax adjustments. It usually starts with purchase price and capitalized acquisition costs, separates land from depreciable building value, adds capital improvements, and subtracts depreciation allowed or allowable and other basis reductions.
How do I separate land from the building for depreciation?
Land is not depreciable, so the purchase price must be allocated between land and building using supportable records such as an appraisal, assessor allocation, or closing documents. This calculator applies the land share of purchase price to the capitalized acquisition costs as well.
Does unclaimed depreciation still reduce adjusted basis?
Yes. For basis purposes, depreciation generally means depreciation allowed or allowable. If the allowable depreciation is higher than what was actually claimed, this calculator still uses the allowable amount as the basis reduction.
How are improvements made after purchase depreciated?
A later structural improvement is treated as a separate depreciable asset placed in service when the improvement is ready and available for rental use. This calculator handles one later structural improvement that uses the same 27.5-year or 39-year real-property recovery period as the building.
Is adjusted basis the same as the mortgage balance?
No. Mortgage balance is debt. Adjusted basis is a tax basis measure based on cost, capital additions, depreciation, and other basis adjustments, and it can be very different from the amount owed on the property.
What happens to adjusted basis when a rental property is sold?
Adjusted basis is used to measure gain or loss on sale, but this calculator does not compute tax. A sale may also involve depreciation recapture, selling expenses, suspended passive losses, state tax, or a 1031 exchange analysis.