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Depreciation formula

Straight-Line Depreciation Formula

annual depreciation = depreciable basis ÷ useful life (years)

Straight-Line Depreciation

annual depreciation = depreciable basis ÷ useful life (years)
  • depreciable basis — Improvement value, excluding land
  • useful life — 27.5 years residential, 39 years commercial under IRS rules

Worked example: A rental building's depreciable basis is $275,000 (residential).

  1. $275,000 ÷ 27.5 = $10,000

$10,000 annual depreciation

Straight-Line Depreciation practice questions

Every Freehold question shows why the right answer is right — and cites its source.

A residential rental's depreciable basis (excluding land) is $220,000, depreciated straight-line over 27.5 years. What is the annual depreciation?

  1. $8,800
  2. $7,333.33
  3. $8,000
  4. $5,641.03
Show answer & explanation

$8,000 — Straight-line depreciation spreads the basis evenly over its useful life: $220,000 ÷ 27.5 years = $8,000 per year.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

A commercial property's depreciable basis is $585,000, depreciated straight-line over 39 years. What is the annual depreciation?

  1. $21,272.73
  2. $19,500
  3. $14,625
  4. $15,000
Show answer & explanation

$15,000 — Commercial property depreciates over 39 years: $585,000 ÷ 39 years = $15,000 per year.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

A rental property's annual straight-line depreciation is $10,800. What is the monthly depreciation amount?

  1. $900
  2. $830.77
  3. $1,080
  4. $981.82
Show answer & explanation

$900 — Divide the annual depreciation by 12 months: $10,800 ÷ 12 = $900.

Source: PSI National Real Estate Exam Content Outline §11 Real Estate Calculations

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