# How to calculate depreciation and tax burden

I am having some issues figuring out to calculate how depreciation affects my tax for a rental property. I have an example below. Is it correctly calculated correctly?

Example:

• Purchase price: `\$1,500,000`
• Rehab: `\$100,000`
• Land Value: `\$750,000`
• Year 1 interest paid: `\$41,632`
• Year 1 principal paid: `\$23,029`
• Yearly property tax: `\$18,750`
• Annual expenses: `\$6,200` (Insurance, utilities, gardener, and so on)
• Tax rate: `25%`
• The annual rent income is `\$129,600`

The house value is `\$750,000` (purchase price - land value) + `\$100,000` in rehab (all just calculated as 27.5 to make it easier), depreciated over 27.5 years is `\$30,909` a year.

If we calculate our year's profit `\$129,600 (rent income) + \$23,029 (principal) - \$6,200 (annual expenses) - \$18,750 (property tax) - \$41,632 (interest paid) = \$86,047`

My depreciation is `\$30,909` a year, I can subtract that from my taxable income. `\$86,047 - \$30,909 = \$55,138` I am then taxed on the `\$55,138` at 25% making this year's tax `\$13,784.5` That would mean my annual profit is `\$86,047 - \$13,784.5 = \$72,262.5` and cash flow `\$72,262.5 - \$23,029 = \$49,233.5`

Is this correct so far?

Let's say that I hold the property for 10 years and sell it for `\$1,950,000`., meaning that I increase the value of the property by `\$450,000`. And the land value was `50% `meaning that the building has increased the value by `\$225,000`.

How do I calculate how the depreciation recapture is taken at this sale?