math

straight-line depreciation

Straight-line depreciation spreads the loss in value or cost of an improvement evenly over its useful life, so the same amount is deducted each year. In appraisal, it is used in the age-life method of the cost approach. For tax purposes, residential rental buildings are generally depreciated over 27.5 years and nonresidential buildings over 39 years. Land is never depreciated.

Exam tip: Annual depreciation = cost of improvements / useful life. Remove land value first, since land does not depreciate.
Example: A rental property cost $350,000, including $75,000 for land. Annual depreciation is $275,000 / 27.5 = $10,000.

1. An investor buys a rental house for $350,000; the land is valued at $75,000. Using straight-line depreciation over 27.5 years, the annual depreciation deduction is:

Answer & explanation

Answer: C. Only the building depreciates: $350,000 - $75,000 = $275,000; $275,000 / 27.5 = $10,000. Using the full price gives $12,727 (wrong).

Related terms & state variants

adjusted basis depreciation depreciation calculation economic life

Sources

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Last verified: 2026-10-23