What MACRS depreciation is
MACRS is how the IRS lets you deduct the cost of business and investment property, such as equipment or a rental home, over several years. Under the General Depreciation System (GDS), each kind of property belongs to a class with a fixed recovery period, from 3 years for some equipment to 39 years for commercial buildings. The class also sets the standard method: 200% declining balance for 3, 5, 7 and 10-year property, 150% declining balance for 15 and 20-year property, and straight line for residential rental and nonresidential real property.
You do not have to do the declining balance math yourself. IRS Publication 946 publishes percentage tables in its Appendix A that already include the method, the convention and the switch to straight line. You multiply the property's unadjusted basis by the rate for each year. This calculator does exactly that with Tables A-1 to A-6 and A-7a.
MACRS is for your tax return. For depreciation in your own books, with a salvage value and a useful life you choose, use the depreciation calculator with straight line, declining balance or sum of the years digits.
Property classes and recovery periods
A few examples from the class list in Publication 946:
| Class | Examples | Method |
|---|---|---|
| 3-year | Tractor units for over-the-road use, race horses over 2 years old | 200% DB |
| 5-year | Cars, taxis, buses, trucks, computers, office machinery such as copiers | 200% DB |
| 7-year | Office furniture and fixtures such as desks, files and safes; property without a class life | 200% DB |
| 10-year | Vessels and barges, single-purpose agricultural structures, trees or vines bearing fruits or nuts | 200% DB |
| 15-year | Land improvements such as fences, roads, sidewalks and shrubbery; qualified improvement property placed in service after 2017 | 150% DB |
| 20-year | Farm buildings, municipal sewers | 150% DB |
| 27.5-year | Residential rental property, such as a rental home or an apartment building | Straight line |
| 39-year | Nonresidential real property, such as an office building, a store or a warehouse | Straight line |
Appendix B of Publication 946 lists the class lives and recovery periods for many more kinds of assets.
Half-year, mid-quarter and mid-month
The convention decides how much depreciation you get in the first year:
- Half-year is the default for property other than buildings. It treats everything as placed in service in the middle of the year, so year 1 gets half a year, whatever the date. Table A-1.
- Mid-quarter replaces it when more than 40% of the depreciable bases you placed in service during the year (not counting residential rental and nonresidential real property) fall into the last 3 months of the tax year. Each item then counts from the middle of its quarter, which gives 1½ months in the first year for the quarter it was placed in service. Tables A-2 to A-5, one per quarter.
- Mid-month applies to residential rental and nonresidential real property. The month it was placed in service counts as half a month. Table A-6 for 27.5 years and Table A-7a for 39 years.
MACRS Table A-1: half-year convention
Rates in percent of the unadjusted basis, as published in Publication 946 for GDS property with the half-year convention:
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
|---|---|---|---|---|---|---|
| 1 | 33.33 | 20.00 | 14.29 | 10.00 | 5.00 | 3.750 |
| 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 |
| 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 |
| 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 |
| 5 | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 | |
| 6 | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 | |
| 7 | 8.93 | 6.55 | 5.90 | 4.888 | ||
| 8 | 4.46 | 6.55 | 5.90 | 4.522 | ||
| 9 | 6.56 | 5.91 | 4.462 | |||
| 10 | 6.55 | 5.90 | 4.461 | |||
| 11 | 3.28 | 5.91 | 4.462 | |||
| 12 | 5.90 | 4.461 | ||||
| 13 | 5.91 | 4.462 | ||||
| 14 | 5.90 | 4.461 | ||||
| 15 | 5.91 | 4.462 | ||||
| 16 | 2.95 | 4.461 | ||||
| 17 | 4.462 | |||||
| 18 | 4.461 | |||||
| 19 | 4.462 | |||||
| 20 | 4.461 | |||||
| 21 | 2.231 |
A worked example
Publication 946 uses office furniture as an example: 7-year property that costs $10,000, placed in service in August, with the half-year convention. Table A-1 gives 14.29% for year 1, so the first deduction is $1,429. Year 2 is 24.49%, or $2,449. After 8 tax years, the deductions add up to the full $10,000. Choose 7-year property in the calculator and enter 10,000 to see every year.
What this calculator does not cover
- Other systems and elections. The Alternative Depreciation System (ADS), the 150% election for 3 to 10-year property and the straight line election use other tables. ADS is required in some cases, for example for listed property used 50% or less for business.
- Section 179 and the special depreciation allowance. Take those first and enter the basis that is left.
- Short tax years. Publication 946 says the percentage tables cannot be used for a short tax year.
- Passenger cars. The total depreciation and section 179 deduction for passenger automobiles is limited each year. See "Do the Passenger Automobile Limits Apply?" in chapter 5 of Publication 946.
- Selling early. In the year you dispose of the property, you get only part of that year's amount.
How to use the MACRS calculator
- 1Pick the property class. Real estate classes switch the form to the month the building was placed in service.
- 2Enter the cost or other basis and the business use share. For equipment, choose half-year or, if the 40% test applies, mid-quarter and the quarter.
- 3Add the first tax year if you want calendar years in the schedule. Read the deduction for each year, then copy the schedule or a link.
Frequently asked questions
What is MACRS?
MACRS, the Modified Accelerated Cost Recovery System, is how the IRS has you recover the basis of most business and investment property placed in service after 1986. It has two systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). GDS, which this calculator uses, gives each kind of property a fixed recovery period, a method and a convention. IRS Publication 946 turns these into percentage tables, and this calculator multiplies your basis by those percentages.
Why does 5-year property take 6 years to depreciate?
Because of the half-year convention. It treats property as placed in service in the middle of the year, so the first year gets only half a year of depreciation. The missing half moves to an extra year at the end. That is why Table A-1 has 6 rates for 5-year property and 8 for 7-year property.
When do I have to use the mid-quarter convention?
When more than 40% of the depreciable bases of the property you placed in service during the year fall into the last 3 months of the tax year. Residential rental and nonresidential real property do not count toward that test. If it applies, every item placed in service that year uses the mid-quarter table for the quarter it was placed in service.
Do I enter a salvage value?
No. Publication 946 says to apply the table rates to the property’s unadjusted basis, and the rates of every column add up to 100%. Over the full recovery period you deduct the whole basis. For book depreciation with a salvage value, use the regular depreciation calculator.
What about the section 179 deduction and bonus depreciation?
Both come first and reduce the basis. Publication 946 lists the section 179 deduction and any special depreciation allowance among the amounts that reduce the basis for MACRS. Enter the basis that is left after them, or the full cost if you claim neither.
What happens if I sell the property early?
The schedule assumes you keep the property for the whole recovery period. In the year you dispose of it, you get only part of a full year. With the half-year convention it is half of the amount for that year; with the mid-quarter and mid-month conventions it depends on the quarter or month. Publication 946 explains the rules under Sale or Other Disposition Before the Recovery Period Ends.
Can I use this for my tax return?
It uses the official percentage tables, so the numbers match what the tables give for a full 12-month tax year. It does not decide which class, convention or system applies to your property, and it does not cover elections, short tax years or the yearly limits on passenger cars. Check Publication 946 or ask a tax professional before you file.