MACRS 27.5-Year Residential Rental Property — Depreciation Schedule 2025 & 2026

What qualifies as 27.5-Year residential rental property?

• Single-family rental homes
• Duplexes, triplexes, and fourplexes
• Apartment buildings (80%+ dwelling income)
• Condominiums and cooperatives held for rental
• Manufactured homes on leased land

Source: IRS Publication 946, Table A-6. If your asset is not explicitly classified, consult Rev. Proc. 87-56 asset-class tables or default to 7-year property.

Straight-line depreciation schedule — $300,000 asset

Worked example: a $300,000 residential rental property placed in service with no Section 179 and no bonus depreciation, showing the raw 27.5-Year straight-line schedule.

Rates from IRS Publication 946 Table A-6. Computed at build time — no hardcoded schedules.

Mid-month convention: the placed-in-service month sets year one

IRS Publication 946 Table A-6 is a month-by-month grid rather than a single column of rates, because real property uses the mid-month convention: every building is treated as placed in service at the midpoint of its actual placed-in-service month. Year one therefore earns half of that month plus all remaining months of the year, and the same half-month logic applies in the year you sell or retire the property.

Worked example: a $300,000 depreciable basis placed in service in July earns 5.5 months of depreciation in year one — about $5,000 — versus $10,909 in each full year afterward. Place the same property in service in December and year one shrinks to half a month, about $455. The formula behind Table A-6 is: first-year deduction = basis × (months in service − 0.5) ÷ 12 ÷ 27.5.

Look up your exact placed-in-service month in IRS Publication 946, Appendix A, Table A-6 — the schedule above uses a simplified half-year split of the first and final years, while the IRS table prorates by your specific month.

Section 179 and bonus depreciation — 2025 vs 2026

Source: One Big Beautiful Bill Act (signed July 2025) and IRS Rev. Proc. 2025-32 (2026 inflation adjustments). The 100% allowance is keyed to the ACQUISITION date, not the placed-in-service date (OBBBA §70301(c)(1)): property acquired before 2025-01-20 stays on the pre-OBBBA §168(k)(6)(A) phase-down for whatever year it is placed in service — 80% (2023), 60% (2024), 40% (2025), 20% (2026), 0% from 2027.

How §179, bonus depreciation, and MACRS stack

The 27.5-year building itself is outside both regimes: §179 excludes it, and bonus depreciation only reaches property with a recovery period of 20 years or less. The practical route to acceleration is a cost-segregation study, which reclassifies parts of the purchase — appliances and carpet (5-year), furniture (7-year), land improvements and qualified improvement property (15-year) — into classes that DO qualify for §179 expensing up to $2,560,000 (2026) and 100% bonus depreciation. Only the basis that stays in the 27.5-year class follows the straight-line, mid-month schedule above.

Half-year vs mid-quarter convention

Neither convention applies to the building: real property always uses the mid-month convention described above and is excluded from the mid-quarter test entirely. The half-year / mid-quarter distinction still matters to landlords, though — short-life assets from a cost-segregation study are personal property, and if more than 40% of that basis is placed in service in the last 3 months of the year, ALL of it drops to mid-quarter first-year rates (1.5 months for a fourth-quarter asset instead of 6). Basis expensed under §179 is excluded from the test.

Source: IRS Publication 946, ch. 4, "Which Convention Applies?" The mid-quarter percentage tables are Tables A-2 through A-5 in Appendix A.

GDS vs ADS for 27.5-year residential rental property

Everything above uses the General Depreciation System (GDS) — the default MACRS system. The Alternative Depreciation System (ADS) stretches the same basis over a longer period using straight-line only.

Residential rental placed in service after 2017 uses a 30-year ADS period (40 years if placed in service before 2018) — electing real property trades or businesses under §163(j) must switch to ADS. On the $300,000 example, ADS reduces the full-year deduction from $10,909 (over 27.5 years) to $10,000 (over 30 years).

Common mistakes and gotchas

• Only the building depreciates — land is never depreciable. Typical allocation is 75–80% to building, 20–25% to land, based on tax-assessor ratios or appraisal.
• A property must be >80% "dwelling unit" gross rental income to qualify as residential rental. Mixed-use (e.g., retail downstairs + apartment upstairs) requires the 80% test annually.
• Cost segregation studies can reclassify parts of the building (carpet, appliances, fixtures, land improvements) into 5/7/15-year classes — accelerating ~20-30% of the depreciable basis.
• Neither §179 nor bonus depreciation applies to the 27.5-year building itself. But cost-seg carve-outs into 5/7/15-year classes DO qualify.
• Depreciation starts the month the property is placed in service (available for rent), not the month of purchase.

Frequently asked questions

MACRS asset classes compared

Run your own schedule with the MACRS depreciation calculator, and estimate the tax bill when you sell with the depreciation recapture calculator.