What depreciation method is typically applied to residential rental property improvements?

The depreciation method typically applied to residential rental property improvements is the 27.5-year straight-line method. This is established by IRS guidelines, where residential rental property is classified with a useful life of 27.5 years. Under the straight-line method, the property improvements are depreciated evenly over that useful life, allowing property owners to allocate the same amount of depreciation expense each tax year.

Using this method is beneficial for landlords because it provides a consistent annual tax deduction, which can help offset rental income and reduce overall tax liability. This straight-line approach also simplifies accounting, as it eliminates the need for more complex calculations required by accelerated depreciation methods. The 27.5-year timeline specifically reflects the IRS's recognition of the relatively longer-term nature of residential property compared to other types of assets, ensuring that property owners are able to reflect the wear and tear of their improvements over a realistic duration.