Is land depreciable?

The short answer, and what it depends on

The rule is stated in the chapter on what property cannot be depreciated, and it is blunt: you cannot depreciate the cost of land because land does not wear out, become obsolete or get used up. Depreciation is an allowance for the wear and tear, deterioration or obsolescence of property, and the publication requires depreciable property to have a determinable useful life. Land has none. The consequence is practical. When you buy rental or business real estate you have to split the price into land, which is never depreciated, and the building and other improvements, which are.

What counts as land cost

The publication says the cost of land generally includes the cost of clearing, grading, planting and landscaping. Those are the activities people most often expect to be able to write off over time, and by default they cannot be. They go into the basis of the land and stay there until you sell it. The same chapter explains how to handle the one situation where the default flips.

The exception for closely tied land preparation costs

You can depreciate certain land preparation costs, such as landscaping, incurred in preparing land for business use, if the costs are so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. The test is whether the item would be destroyed or removed when the building is. The publication’s example is a business that builds a new building and pays for grading, clearing, seeding and planting bushes and trees. Some of the bushes and trees are planted right next to the building and others around the outer border of the lot. If the owner replaced the building, the plantings next to it would have to be destroyed, so they are closely associated with the building and have a determinable useful life. They can be depreciated. The other land preparation costs, including the border plantings, are added to the basis of the land because they have no determinable life.

A related line appears in the chapter on the section 179 deduction: land and land improvements do not qualify as section 179 property, and land improvements include swimming pools, paved parking areas, wharves, docks, bridges and fences. Land improvements can still be depreciated under MACRS as 15-year property, which the publication describes as certain improvements made directly to land or added to it, such as shrubbery, fences, roads, sidewalks and bridges. So a paved parking lot is depreciable even though the ground under it is not, and the difference is the one between the improvement and the land itself.

Worked example

You pay $300,000 for a residential rental property, including closing costs, and the land is worth $60,000 of that. Only $240,000 is depreciable. Under the General Depreciation System, residential rental property has a 27.5-year recovery period, so a full year of straight-line depreciation is $240,000 divided by 27.5, or $8,727.27. If it had been nonresidential real property, which has a 39-year period, the full-year figure would be $240,000 divided by 39, or $6,153.85. First-year depreciation is smaller because the mid-month convention gives only part of the first year. The calculator above splits the figures and reports the land share of your total cost. The point of the exercise is the size of the land share: every dollar assigned to land is a dollar that produces no deduction, which is also why the allocation attracts scrutiny from the IRS.

Getting the split right

Publication 946 tells you to leave land out of depreciable basis but does not set out an allocation formula. It points to Publication 551 for the rules on basis. Practical sources are the property tax assessment ratio, an appraisal that values land and improvements separately, and the settlement statement, whichever best reflects fair market value at purchase. Settlement costs that add to the basis of real property, such as legal and recording fees, abstract fees, survey charges, owner’s title insurance and amounts the seller owes that you agree to pay, increase basis, which you then allocate between the land and the building. Be consistent from year to year, and keep the support with the tax records. The publication separately says you must reduce the basis of property by the depreciation allowed or allowable, whichever is greater, which means skipping depreciation does not preserve the basis.

When land is not the only thing excluded

Land is one of the categories of property that cannot be depreciated. The same list includes property placed in service and disposed of in the same year, equipment used to build capital improvements (whose depreciation during construction is added to the basis of the improvement), section 197 intangibles (which are amortized instead), and certain term interests held where a related person holds the remainder interest. Inventory is not depreciable either, because it is not held for use in the business.

Converting personal property

When a personal home becomes a rental, the land is again excluded. The publication’s example splits the fair market value on the conversion date between land and house and depreciates the house; see can you depreciate personal property converted to business.

Limits of this page

The calculator uses straight-line figures for real property and does not apply the mid-month convention except where noted, so use it for planning, and see when property is placed in service for the first-year arithmetic. The rental property depreciation calculator builds the full schedule. This page is not tax advice.

Sources

• IRS Publication 946, How To Depreciate Property (2025): Chapter 1, What Property Cannot Be Depreciated? (Land); Chapter 2, Land and Improvements. Page last reviewed or updated by the IRS April 30, 2026. Read November 2, 2026.

Edition read: Publication 946 (2025), for use in preparing 2025 returns. Limits and percentages quoted are for 2025 unless a page says otherwise. For tax years beginning in 2025 the publication gives a section 179 limit of $2,500,000, reduced dollar for dollar once qualifying purchases exceed $4,000,000, and $31,300 for heavy sport utility vehicles. Its What’s New for 2026 section gives $2,560,000, a $4,090,000 purchase threshold and $32,000. For qualified property acquired and placed in service after January 19, 2025 the special depreciation allowance is 100 percent, with an election for 40 percent in the first tax year ending after that date; for qualified property acquired before January 20, 2025 and placed in service in 2025 it is 40 percent. Check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it. Marked for human review.