Calculate MACRS depreciation for business assets using IRS tables. Supports 3, 5, 7, 10, 15, and 20-year property classes with half-year convention.
Examples of 7-year property: Office furniture, agricultural machinery, railroad track, most manufacturing equipment
| Year | Rate | Depreciation | Book Value |
|---|---|---|---|
| 2026 | 14.29% | $7,145 | $42,855 |
| 2027 | 24.49% | $12,245 | $30,610 |
| 2028 | 17.49% | $8,745 | $21,865 |
| 2029 | 12.49% | $6,245 | $15,620 |
| 2030 | 8.93% | $4,465 | $11,155 |
| 2031 | 8.92% | $4,460 | $6,695 |
| 2032 | 8.93% | $4,465 | $2,230 |
| 2033 | 4.46% | $2,230 | $0 |
Note: Rates from IRS Publication 946. Real property (27.5 and 39-year) uses mid-month convention with straight-line depreciation. Consult a tax professional for Section 179 deductions, bonus depreciation, or complex situations.
MACRS (Modified Accelerated Cost Recovery System) is the primary depreciation system used for tax purposes in the United States. Established by the Tax Reform Act of 1986, MACRS replaced the earlier Accelerated Cost Recovery System (ACRS) and provides businesses with a standardized method to recover the cost of business assets over a predetermined "recovery period."
Under MACRS, businesses can deduct a portion of an asset's cost each year as a depreciation expense, reducing taxable income. The system uses accelerated depreciation methods, meaning larger deductions are taken in the early years of an asset's life, providing businesses with greater tax benefits sooner.
MACRS applies to most tangible property placed in service after 1986, including machinery, equipment, vehicles, furniture, and certain buildings. The IRS defines specific recovery periods and depreciation rates based on the type of property, eliminating much of the guesswork that existed under previous systems.
MACRS uses predetermined depreciation rates published by the IRS in Publication 946. Rather than calculating depreciation using complex formulas, taxpayers simply multiply the asset's depreciable basis by the applicable percentage for each year.
The basic formula is:
Where the depreciable basis is typically the original cost of the asset minus any salvage value (though for MACRS, salvage value is usually not subtracted from the basis).
MACRS includes two depreciation systems:
General Depreciation System (GDS) - The default and most commonly used system. It provides shorter recovery periods and uses declining balance methods that switch to straight-line when advantageous. This calculator uses GDS rates.
Alternative Depreciation System (ADS) - Uses longer recovery periods and straight-line depreciation. Required for certain property types (like tax-exempt use property) and for calculating Alternative Minimum Tax (AMT) adjustments.
MACRS uses conventions to determine how much depreciation is allowed in the first and last years of an asset's recovery period:
Half-Year Convention - The most common convention. It treats all property as placed in service at the midpoint of the year, regardless of when it was actually placed in service. This means half of a full year's depreciation is taken in the first year and half in the final year.
Mid-Quarter Convention - Required when more than 40% of all depreciable property (excluding real estate) is placed in service during the last quarter of the year. It treats property as placed in service at the midpoint of the quarter.
Mid-Month Convention - Used only for real property (buildings). Treats property as placed in service at the midpoint of the month it was placed in service.
Personal property (non-real estate) is divided into six classes based on the asset's useful life. Each class has specific IRS-defined depreciation rates:
Examples include:
Examples include:
The default class for most business property. Examples include:
Examples include:
Examples include:
Examples include:
Real estate has longer recovery periods using straight-line depreciation:
27.5-Year Residential Rental Property - Used for rental housing like apartment buildings, duplexes, and single-family rental homes.
39-Year Nonresidential Real Property - Used for commercial buildings like offices, warehouses, retail stores, and manufacturing facilities.
The following table shows the IRS-specified depreciation rates for the first three years across different property classes:
| 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% |
Notice that the recovery period extends one year beyond the class life (3-year property has 4 years of depreciation). This is due to the half-year convention, which only allows half a year of depreciation in both the first and last years.
The depreciable basis is typically the asset's cost, including:
Determine which MACRS class applies to your asset based on its type and expected useful life. When in doubt, most personal property defaults to the 7-year class.
Most assets use the half-year convention. Check if the mid-quarter convention applies (more than 40% of annual property acquisitions in Q4).
Multiply the basis by the appropriate percentage from the MACRS table for each year.
A business purchases manufacturing equipment for $50,000. This is 7-year property using the half-year convention.
| Year | Rate | Calculation | Depreciation | Book Value |
|---|---|---|---|---|
| 1 | 14.29% | $50,000 × 0.1429 | $7,145 | $42,855 |
| 2 | 24.49% | $50,000 × 0.2449 | $12,245 | $30,610 |
| 3 | 17.49% | $50,000 × 0.1749 | $8,745 | $21,865 |
| 4 | 12.49% | $50,000 × 0.1249 | $6,245 | $15,620 |
| 5 | 8.93% | $50,000 × 0.0893 | $4,465 | $11,155 |
| 6 | 8.92% | $50,000 × 0.0892 | $4,460 | $6,695 |
| 7 | 8.93% | $50,000 × 0.0893 | $4,465 | $2,230 |
| 8 | 4.46% | $50,000 × 0.0446 | $2,230 | $0 |
Total depreciation: $50,000 (100% of basis recovered)
While MACRS spreads deductions over multiple years, two important provisions allow faster write-offs:
Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it's placed in service, rather than depreciating it over time. For 2025:
Bonus depreciation allows businesses to deduct a percentage of the asset's cost in the first year, in addition to regular MACRS depreciation. For property placed in service in 2025, bonus depreciation is 40% (phasing down from 100% in 2022).
Many businesses combine these provisions: first applying Section 179 up to its limit, then taking bonus depreciation on any remaining basis, and finally using MACRS for any amount still remaining.
| Method | Use Case | Calculation |
|---|---|---|
| MACRS | U.S. tax returns | IRS-specified rates by asset class |
| Straight-line | Book/financial reporting | Equal annual amounts |
| Double declining balance | Early write-off preference | 2 × straight-line rate |
| Units of production | Usage-based assets | Based on actual usage |
MACRS is mandatory for federal tax purposes, but companies often use straight-line depreciation for financial reporting (GAAP). This creates book-tax differences that must be tracked.
MACRS must be used for tax purposes when:
MACRS does not apply to:
If you sell or dispose of an asset before fully depreciating it, you can only claim depreciation for the portion of the year you owned it (using the applicable convention). Any unrecovered basis affects your gain or loss calculation.
When you sell property for more than its depreciated value, you may need to "recapture" some depreciation as ordinary income rather than capital gain. This is particularly important for real property under Section 1250 and personal property under Section 1245.
Certain assets like vehicles, computers used at home, and cell phones are "listed property" with additional substantiation requirements. If business use falls below 50%, you may need to recapture excess depreciation.
MACRS depreciation may need to be adjusted when calculating Alternative Minimum Tax. The adjustment typically involves recalculating depreciation using the Alternative Depreciation System (ADS) with longer recovery periods.
Since MACRS uses the half-year convention, property placed in service at any point during the year receives the same first-year depreciation. However, be mindful of the mid-quarter convention trigger if you're making significant Q4 purchases.
Consider whether Section 179 or bonus depreciation makes more sense than standard MACRS:
For buildings, cost segregation studies can identify components that qualify for shorter recovery periods (5, 7, or 15 years) rather than 27.5 or 39 years, significantly accelerating depreciation deductions.
Can I choose a different depreciation method? For tax purposes, MACRS is generally required for qualifying property. However, you can elect ADS (which uses straight-line depreciation over longer periods) if desired.
What if I use an asset for both business and personal purposes? You can only depreciate the business-use percentage. For example, if you use your car 60% for business, you depreciate 60% of its cost.
Does salvage value matter under MACRS? Unlike financial accounting methods, MACRS does not require you to reduce the depreciable basis by salvage value. You depreciate the full cost.
What happens in a short tax year? Special rules apply. Generally, you must prorate the first-year depreciation based on the number of months in the short year.