Depreciating a rental property in India on your US return (with 30-year ADS calculator) (2026)

Why the 27.5-year number on US calculators is wrong for your India flat

Nearly every US-focused rental calculator (BiggerPockets, Rentastic, generic blog posts) uses 27.5 years. That is the General Depreciation System (GDS) recovery period for residential rental property, and it applies to US rentals under MACRS. For an Indian flat, you are not on GDS. The statute puts property used predominantly outside the United States onto ADS whether you want to be there or not.

The IRS lists the categories that must use ADS in Pub 946, including "Any tangible property used predominantly outside the United States during the tax year" (Pub 946, ch.4). A flat in Hyderabad or Bengaluru that is rented out for the full tax year sits entirely in India; its physical presence is 100% outside the United States, so the mandatory-ADS category applies.

Under ADS, residential rental has a longer recovery period and uses straight-line depreciation. Both of those details change your annual deduction. A $200,000 house in Atlanta on GDS gives roughly $7,273 of depreciation per year ($200,000 ÷ 27.5). The same economic building in Pune on ADS placed in service in 2026 gives $6,667 per year ($200,000 ÷ 30). That is a smaller deduction, spread longer, and you cannot elect out of it for a foreign-use property — the ADS requirement is "by law", not an election.

How is a rental property in India depreciated on a US return?

Four facts control the entire calculation:

1. System: ADS, mandatory under IRC 168(g)(1)(A).
2. Method: Straight-line, no salvage value (Pub 946).
3. Recovery period: 30 years if placed in service on or after 1 Jan 2018; 40 years if before.
4. Convention: Mid-month.

The depreciable base is the lower of your cost basis or the fair market value on the date the property was converted to rental use, allocated between building and land. The IRS worked example in Pub 527 is explicit: "You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land" using the property's assessed-value split (Pub 527). The land share is permanently non-depreciable.

For an Indian flat where the municipal records do not separate building and land in the US sense (common in apartment-society property), a defensible method is a reasonable allocation based on the undivided share of land in the sale deed, a certified-valuer report, or an insurance replacement-cost estimate. Document the method; keep the source paper.

The in-service date is "when it is ready and available for a specific use in that activity. Even if you aren't using the property, it is in service when it is ready and available for its specific use" (Pub 527). Posting the flat on NoBroker or 99acres and handing the keys to a broker — before you actually sign a tenant — is enough.

30-year ADS depreciation calculator

The arithmetic is small enough to do on the back of an envelope. Depreciable base ÷ 30, then mid-month-adjusted in the first and final years.

How to use it:

• Depreciable base is your allocated building cost in USD, translated at the exchange rate on the date of acquisition or the conversion-to-rental date (whichever applies). Attach your source: `rbi.org.in` reference rate or the IRS yearly average rate for INR.
• Full-year amount is the deduction every year from year 2 through year 30.
• First-year amount uses the mid-month convention: a half-month in the placed-in-service month and full months thereafter. Formulas: (12.5 − month number) ÷ 12 of the full-year amount if placed in service in month N. March = 9.5/12, June = 6.5/12, December = 0.5/12.
• Year-of-sale amount mirrors it: a half-month for the sale month and full months before.

Example. Rohan converts his Hyderabad flat to a rental on 1 April 2026. His allocated building basis after FX translation is $180,000. Full-year ADS = $180,000 ÷ 30 = $6,000. Placed-in-service month is April (month 4), so the first-year factor is 8.5 ÷ 12 = 0.7083. First-year depreciation = $6,000 × 0.7083 = $4,250 on Schedule E. Years 2026 through 2055 produce $6,000 each (full years, after month ten of the final 30-year run he gets 0.7917 × $6,000 = $4,750 to finish the schedule). Total depreciation claimed over the life ≈ $180,000, basis at the end ≈ $0 for the building share.

What goes on the US forms?

Depreciation flows from Form 4562 (Depreciation and Amortization) to Schedule E (Supplemental Income and Loss, Part I rental real estate). The ADS election is "indicated by entering the depreciation on Form 4562, Part III, Section C, line 20c" for property placed in service during the current tax year (Pub 527). Column (e) carries "MM" to flag the mid-month convention; column (f) carries "S/L" for straight-line.

For year-2-and-later depreciation on the same property, taxpayers continue to use Form 4562 Part III line 17 for assets placed in service in prior tax years under MACRS/ADS; the convention and life established in year 1 carry forward. Keep a depreciation schedule tracking:

• Placed-in-service date
• Original depreciable base (building only, in USD)
• Recovery period (30 years for post-2017 placed-in-service dates)
• Prior-year depreciation taken
• Current-year depreciation
• Accumulated depreciation (needed at sale)

FBAR, Form 8938 and the India side

The depreciation question is separate from the reporting questions, but Indian rental ownership rarely sits alone on a US return. If you also have Indian bank accounts collecting rent, keep an eye on the FBAR and Form 8938 thresholds (see our FBAR + Form 8938 guide for Indian accounts). On the India side, rental income from the Indian property is taxable in India under "Income from house property" and India also allows its own 30% statutory deduction plus home-loan interest; those are India numbers, not US numbers. Your US return does not borrow India's depreciation — it computes its own.

Where the two returns interact is foreign tax credit. Indian income tax you pay on the net rent (after Indian deductions) is creditable against the US tax on the same rental income via Form 1116 (passive category). Our reporting India income on a US return post walks through the Form 1116 mechanics for rent, interest and dividends.

What happens at sale: recapture even if you did not depreciate

Section 1250 unrecaptured gain is calculated on the full "allowed or allowable" depreciation. From Pub 946: "If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable." That is the trap.

Worked example. Priya buys a Pune flat in March 2019, converts it to a rental in May 2019, and never claims depreciation because she "didn't owe US tax anyway" (foreign tax credit zeroed out her Schedule E). Building basis was $160,000. Allowable ADS depreciation per year ≈ $5,333. Over 2019 through 2025, allowable ≈ $37,000. In 2026 she sells for a gain. At sale, her basis in the building is $160,000 − $37,000 = $123,000, exactly as if she had claimed every dollar. The capital gain is $37,000 higher than she expected, and up to that amount is taxed as unrecaptured Section 1250 gain at a 25% maximum federal rate.

If Priya is still inside the window, the fix is Form 3115 with Designated Change Number 7, which pulls the entire missed amount into the year of change as a negative Section 481(a) adjustment: "a negative section 481(a) adjustment" is taken into account entirely "in 1 tax year (year of change)" (Form 3115 instructions). Full walkthrough in our Form 3115 missed-depreciation guide.

When ADS is 40 years instead of 30

For a flat placed in service as a rental in the United States tax system before 1 January 2018, ADS was 40 years, not 30. The TCJA shortened it to 30 for property placed in service after 2017. The Pub 946 ADS table carries both: residential rental "30 years" with a footnote "40 years for property placed in service before January 1, 2018" (Pub 946).

Why it matters: if you bought your Bengaluru flat in 2010 and rented it from 2013, you are stuck with the 40-year straight-line schedule for its entire remaining life — the TCJA 30-year period is not retroactive for property already in service. A $200,000 building on 40-year ADS gives $5,000 per year, not $6,667.

How we handle this at Lesser

Three questions decide the depreciation line for every Indian rental we take on:

1. Placed-in-service date in the US tax sense? Not the India purchase date — the date the property was first ready and available to rent while you were a US tax resident. This is the point the 30-year clock starts, and the mid-month convention keys off the month.
2. Building vs land split? We require a dated source: sale deed with land share, municipal assessment, certified-valuer letter, or society-maintained records. We do not accept a round-number guess.
3. FX basis? INR cost translated at a defensible rate on the acquisition date (or conversion date, if lower). Keep the RBI reference-rate screenshot or IRS yearly-average table reference in your file.

Common misses we see on self-prepared returns: using 27.5 years instead of 30, forgetting to carve out land, translating INR at today's rate instead of acquisition-date rate, and skipping Form 4562 entirely because Schedule E "looks fine" with a zero depreciation line.