Commercial Building Depreciation: How Many Years Does It Take?

If you own or plan to buy a commercial building, you’re probably eyeing those tax savings from depreciation. Here’s the simple deal: in the US, commercial buildings generally depreciate over 39 years (yep, that specific). So each year, you can write off about 1/39th of the building’s value, not counting the land because the IRS says land doesn’t wear out.

This isn’t just a small thing—it can mean thousands shaved off your taxable income every year, especially for bigger properties. Landlords, investors, and business owners all use this rule to lighten the tax bill. Just remember, this depreciation starts the very first year the building is ready and available for use, not when you bought it or when you first heard about depreciation tricks on TikTok.

• What Is Depreciation for Commercial Buildings?
• The IRS Depreciation Timeline (And Why It’s 39 Years)
• How Depreciation Impacts Your Taxes
• Tips to Maximize Your Depreciation Benefits

What Is Depreciation for Commercial Buildings?

Depreciation is a goldmine tax move for anyone owning a commercial property. In plain English, the IRS lets you spread out the cost of your building—excluding the land—across several years. So, instead of taking one big hit on expenses, you break it up into smaller chunks, year by year. This rule doesn’t just help businesses manage cash flow. It’s a big reason why so many people get into real estate investing.

The official word from the IRS is: commercial buildings get depreciated over 39 years. Residential properties? They’re on a 27.5-year schedule. But since we’re talking about stores, offices, warehouses, and similar places, that’s 39 years for the building—never the land underneath.

"Depreciation is an annual income tax deduction that allows a taxpayer to recover the cost or other basis of certain property." — IRS Publication 946

The logic here is simple. Over time, roofs crack, HVACs go bust, and interiors get old. The IRS says your building loses value each year due to wear and tear, so you get to write off a portion of its value even if it’s still making you profit.

Here’s how it typically works for building depreciation:

• You buy a commercial building (let’s say for $1,000,000).
• You figure out how much of that price is the land (maybe $200,000) and how much is the building ($800,000).
• Only the building amount gets depreciated over 39 years.
• That’s about $20,513 as a deduction each year ($800,000 divided by 39).

Some quick numbers add perspective:

If you skip depreciation, you’re leaving free money on the table. It’s both a core part of tax deductions and helpful for timing major upgrades. That’s why every smart property owner—and their accountant—keeps this front of mind.

The IRS Depreciation Timeline (And Why It’s 39 Years)

When it comes to commercial property, the IRS doesn’t just pick numbers out of thin air. Back in 1993, Congress laid out clear rules that set the building depreciation period for commercial buildings to 39 years. This isn’t some ballpark guess—it’s the federal standard most everyone follows for real estate placed in service after May 12, 1993.

Here’s why: the idea is that, over 39 years, a building wears out or becomes outdated. The IRS uses this to let property owners recover their investment, little by little, through yearly tax deductions. Residential rentals get a shorter deal (27.5 years), but anything strictly commercial—think offices, retail spaces, warehouses—sticks with this 39-year rule.

The IRS uses the Modified Accelerated Cost Recovery System (MACRS). It’s a mouthful, but all it really means is you write off the value of your building—excluding land—over a set schedule. For commercial property, the straight-line method is the go-to, so deductions are spread evenly each year.

One tip: the 39 years start from the moment the building is “placed in service.” That means it’s ready to use for its intended purpose, not just when you close the deal or when tenants move in. If you renovate or improve the building, those costs start their own fresh depreciation schedules.

This setup makes tax deductions reliable and predictable. Don’t forget—the IRS is strict here. If you miscalculate or try to rush the process, you’re risking penalties and an awkward audit.

How Depreciation Impacts Your Taxes

Depreciation is a major player when it comes to lowering your tax bill on commercial property. Here’s the nuts and bolts: every year as your building "wears out" from an accounting point of view, you can write off a chunk of its value. For commercial buildings, that's a straight line: 1/39th per year, over 39 years according to the IRS. This deduction directly reduces the net income you report from your property—meaning a smaller slice goes to Uncle Sam.

Say you own an office building worth $1,950,000 (excluding the land). Each year, you get to deduct $50,000 as depreciation ($1,950,000 divided by 39 years) from your taxable income. That’s real money in your pocket, not just on paper. If you’re in a 24% tax bracket, that means you keep $12,000 more every year—just from using this rule.

You claim the deduction on IRS Form 4562, which gets included with your federal tax return. One little reminder: if you decide to sell your commercial property, the IRS will "recapture" some of that depreciation back, so you’ll pay more in taxes on your gain. That’s called depreciation recapture, and it can get pricey.

• The building—you only depreciate the structure, not the land
• The time—you start depreciating as soon as the building’s ready for business use
• Passive activity rules—these can limit how much you can deduct if you’re not actively involved in the business

And here's one more practical tip: make sure to keep good records on when the property enters service and any improvements you make, since these can mean extra deductions if you play it smart with the IRS guidelines on commercial property depreciation.

Tips to Maximize Your Depreciation Benefits

Getting the most out of your commercial property means squeezing every bit of value from depreciation. There’s more to it than just dividing the cost by 39 years and calling it a day. Here’s how the pros find extra savings.

• Cost Segregation Studies: Don’t lump everything together under the 39-year rule. Some parts of your commercial property—like carpets, light fixtures, or landscaping—can be depreciated much faster (5, 7, or 15 years). Hiring an expert for a cost segregation study lets you separate these elements out and boost your deductions in the early years.
• Track Improvements—Not Just the Building: Any upgrades (think HVAC systems, security, or new windows) can have a separate, shorter depreciation schedule from the main building. Log every improvement and tell your accountant. You don’t want to miss these extra claims.
• Stay On Top of Repairs vs. Improvements: Repairs (like patching a roof) may be deducted immediately, while improvements (like a brand new roof) need to be depreciated. Mixing these up can cost you money. Be clear about what counts as each.
• Know When to Use Section 179 and Bonus Depreciation: For certain items—yes, even some building components—you might be able to take a big deduction upfront using Section 179 or bonus depreciation. The rules here change often, so check what’s current in the year you’re filing.

Staying organized is half the battle. Keep records of purchase dates, costs, and a clear breakdown of what goes where. Some investors use simple spreadsheets while others use real estate-specific accounting software to keep things tidy.

Finally, work with a tax pro who knows commercial property and building depreciation. Seriously, one good accountant can pay for themselves, and then some, by spotting missed deductions and steering you clear of IRS trouble.