MACRS Depreciation Calculator

IRS GDS Property Class Quick Reference — select a row to apply that class
Recovery Period	Typical Asset Examples
3-Year	Tractors, rent-to-own property, racehorses
5-Year	Vehicles, computers, office equipment, R&D equipment
7-Year	Office furniture, fixtures, general-purpose machinery
10-Year	Water transportation equipment, certain agricultural property
15-Year	Land improvements, gas stations, retail spaces
20-Year	Farm buildings, certain utility property
25-Year	Water utility property
27.5-Year	Residential rental property
39-Year	Nonresidential commercial real property

Introduction

When your business buys something big (a truck, a computer, office desks, or a building), you do not write off the whole cost in one year. The IRS makes you spread that cost over several years. This is called depreciation. In the United States, most business assets use a system called MACRS (Modified Accelerated Cost Recovery System).

This MACRS depreciation calculator builds that schedule. Type in what the asset cost, how much you use it for business, and what kind of property it is. The tool then shows you a full year-by-year depreciation schedule.

You get:

Your depreciable basis (cost × business use %)
The deduction for each year of the recovery period
The MACRS rate used each year
Accumulated depreciation and book value
A step-by-step breakdown of the math
A chart you can print for your records

The calculator follows IRS Publication 946 rules. It picks the right method for your property class, applies the correct convention (half-year, mid-quarter, or mid-month), and switches from declining balance to straight-line at the right time, the same way the IRS tables do.

Use it to plan your taxes, check your accountant's numbers, or see how a purchase will lower your taxable income over time.

How to use our MACRS Depreciation Calculator

Enter your asset cost, business use, and MACRS property details. The calculator shows your Year 1 deduction, average yearly deduction, total depreciation, a full year-by-year MACRS depreciation schedule, and a chart of your book value.

Asset Cost: Type the full price you paid for the asset, before any business-use split.

Business Use (%): Enter the share of use that is for business. The tool multiplies your cost by this percent to get your depreciable basis.

Recovery Period (Property Class): Pick the IRS GDS class that fits your asset, like 5-year for cars and computers or 39-year for commercial buildings. You can also open the property class reference table and click a row to set it.

Depreciation Method: Choose 200% declining balance, 150% declining balance, or straight-line. Declining balance gives bigger write-offs early and switches to straight-line on its own. Real property is locked to straight-line.

IRS Convention: Choose half-year, mid-quarter, or mid-month. This sets how much of the first year you can deduct. Real property is locked to mid-month.

Month Placed in Service: Pick the month the asset first went into business use. This matters most for mid-month and mid-quarter conventions.

Year Placed in Service: Enter the tax year the asset started business use. This labels each year in your depreciation schedule.

Click Calculate to see your results, Reset to start over, or Print Schedule to save a copy for your tax records.

What Is MACRS Depreciation?

MACRS stands for Modified Accelerated Cost Recovery System. It is the tax rule the IRS uses in the United States to let businesses write off the cost of things they buy, like trucks, computers, machines, or buildings. Instead of deducting the full price in one year, you spread the deduction over several years. Each year's deduction lowers your taxable income, so you pay less tax.

How MACRS Works

Three things decide your yearly deduction:

Depreciable basis: what you paid for the asset, times the percent you use it for business.
Recovery period: how many years the IRS says the asset lasts (3, 5, 7, 10, 15, 20, 25, 27.5, or 39 years).
Method and convention: how fast you write it off, and what part of the first year counts.

Property Classes

The IRS puts each asset into a class. Here are common ones:

3-year: tractors, some tools
5-year: cars, trucks, computers, office equipment
7-year: office furniture, most machinery
15-year: land improvements, gas stations
27.5-year: homes and apartments you rent out
39-year: stores, offices, and other business buildings

Declining Balance and the Switch to Straight-Line

Most equipment uses 200% declining balance or 150% declining balance. These give bigger deductions in the early years, which helps your cash flow sooner. Once straight-line would give a larger deduction, the rules switch you to straight-line for the rest of the years. Buildings and rental homes must use straight-line only, with the same amount each full year.

Conventions: The First-Year Rule

You rarely buy an asset on January 1, so the IRS uses a "convention" to decide how much of the first year you get:

Half-year: you get 6 months of depreciation, no matter what month you bought it. This is the normal rule for equipment.
Mid-quarter: required if more than 40% of your equipment for the year was placed in service in October through December.
Mid-month: used for buildings and rental property. You get credit from the middle of the month you started using it.

Because of these rules, the schedule runs one year longer than the recovery period. A 5-year asset is written off over 6 tax years.

Business Use Matters

If you use an asset only part of the time for business, you can only depreciate that part. A $40,000 truck used 75% for business has a $30,000 basis. If business use is 50% or less on listed property like vehicles, you must use the slower ADS straight-line method instead of accelerated depreciation.

Why It Matters

Knowing your yearly deduction helps you plan taxes, set prices, and decide when to buy new equipment. It also helps you track book value, which is the cost minus all depreciation taken so far. Book value matters when you sell the asset, because gains above that amount can be taxed as depreciation recapture. Tax rules change, so check IRS Publication 946 or ask a tax pro before filing.

Formulas used

Adjusted Depreciable Basis

B = \text{Cost} \times \frac{\text{Business Use \%}}{100}

First-Year Convention Fraction (Half-Year / Mid-Month / Mid-Quarter)

f_1 = \begin{cases} 0.5 & \text{Half-Year} \\[4pt] \dfrac{12.5 - m}{12} & \text{Mid-Month} \\[4pt] \dfrac{12 - 3\left(\left\lceil m/3 \right\rceil - 1\right) - 1.5}{12} & \text{Mid-Quarter} \end{cases}

Declining-Balance Annual Deduction

DB_i = BV_{i-1} \times \frac{d}{L} \times f_i, \qquad f_i = \begin{cases} f_1 & i = 1 \\ 1 & i > 1 \end{cases}

Straight-Line Annual Deduction (over remaining life)

SL_i = \frac{BV_{i-1}}{RL_i} \times f_i, \qquad RL_{i+1} = RL_i - f_i,\; RL_1 = L

Annual Depreciation with Automatic Switch to Straight-Line

D_i = \begin{cases} SL_i & \text{if } SL_i \ge DB_i \text{ (switch, and all later years)} \\ DB_i & \text{otherwise} \end{cases}

IRS Pub. 946 Table-Rate Deduction (Half-Year convention classes)

D_i = B \times \frac{r_i\%}{100}

Accumulated Depreciation and Book Value

A_i = \sum_{k=1}^{i} D_k, \qquad BV_i = B - A_i

Total and Average Annual Depreciation

\sum_{i=1}^{n} D_i = B, \qquad \bar{D} = \frac{\sum_{i=1}^{n} D_i}{L}

Frequently asked questions

Does MACRS use salvage value?

No. MACRS ignores salvage value. You depreciate the full depreciable basis down to zero.

This is different from book depreciation used in accounting, where you often subtract an estimated salvage or scrap value first. For taxes, the IRS treats salvage value as zero, so your total write-off equals your basis.

What is the difference between MACRS GDS and ADS?

GDS (General Depreciation System) is the normal, faster system. ADS (Alternative Depreciation System) is slower and uses straight-line over longer recovery periods.

GDS: uses declining balance for most equipment, shorter lives, bigger early deductions.
ADS: straight-line only, longer lives (for example, 40 years for many buildings, 30 years for residential rental).

ADS is required for listed property used 50% or less for business, most property used outside the U.S., tax-exempt use property, and some farming assets. You can also elect ADS on purpose, but the choice is permanent for that class of property that year.

What are the MACRS rates for 5-year property?

Under the half-year convention with 200% declining balance, the IRS table rates are:

Year 1: 20.00%
Year 2: 32.00%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%
Year 6: 5.76%

Multiply each rate by your depreciable basis. The six rates add up to 100%, so a $30,000 basis gives $6,000 in year 1 and $1,728 in year 6.

Can you take Section 179 and MACRS depreciation on the same asset?

Yes. Section 179 comes first. You deduct the amount you elect, then depreciate whatever is left using MACRS.

Example: a $60,000 machine with a $40,000 Section 179 deduction leaves $20,000. That $20,000 becomes your MACRS basis for the 7-year schedule.

Section 179 has a yearly dollar cap and cannot create a business loss, so many owners mix it with MACRS.

Is bonus depreciation taken before or after MACRS?

Bonus depreciation comes after Section 179 but before regular MACRS.

The order is:

Section 179 deduction
Bonus depreciation on the remaining basis
MACRS on what is still left

Example: a $100,000 asset with no Section 179 and 40% bonus gives $40,000 in bonus. The other $60,000 goes on the normal MACRS schedule. Bonus rates change by year, so check the current rate before you file.

What is depreciation recapture when you sell an asset?

Recapture means the IRS taxes back part of the depreciation you already deducted when you sell for more than your book value.

Equipment (Section 1245): gain up to the total depreciation taken is taxed as ordinary income.
Buildings (Section 1250): depreciation taken is taxed at up to 25%, called unrecaptured Section 1250 gain.

Any gain above your original cost is usually a capital gain.

What happens to depreciation in the year you sell an asset?

You get a partial deduction for the sale year, based on your convention.

Half-year: half of that year's normal amount.
Mid-quarter: depends on the quarter you sold in.
Mid-month: counts through the middle of the sale month.

After that, the schedule stops. Your remaining basis is used to figure your gain or loss on the sale.

Can you skip a year of depreciation and claim it later?

No. The IRS uses an "allowed or allowable" rule. Your basis drops by the depreciation you could have taken, even if you never claimed it.

That means skipping a year loses the deduction but still raises your taxable gain when you sell. If you missed depreciation in past years, you usually fix it by filing Form 3115 to change accounting method, not by amending old returns.

How do you know if the mid-quarter convention applies?

Add up the depreciable basis of all personal property you placed in service that tax year. If more than 40% of that total was placed in service in the last quarter (October, November, December), you must use mid-quarter for everything you placed in service that year.

Leave real property (buildings) and any property you dispose of in the same year out of the test. Property fully expensed under Section 179 is also excluded from the 40% math.

Can you depreciate land?

No. Land never wears out, so it cannot be depreciated.

When you buy property, you must split the price between land and the building. Only the building part gets depreciated (27.5 years for residential rental, 39 years for commercial). A common way to split the value is the property tax assessment ratio.

Land improvements like fences, parking lots, and landscaping are different. Those are 15-year property and can be depreciated.

What form do you use to report MACRS depreciation?

Form 4562, Depreciation and Amortization. You file it with your tax return.

You need it in any year you place new property in service, claim Section 179, claim bonus depreciation, or depreciate listed property like vehicles. After the first year, ongoing depreciation on older assets often flows straight to your business schedule without a new Form 4562.

Are there limits on how much you can depreciate a car?

Yes. Passenger vehicles are "listed property" and face yearly dollar caps under Section 280F, often called luxury auto limits. The caps apply even though cars are 5-year property.

Heavy SUVs and trucks over 6,000 pounds gross vehicle weight escape those caps but have their own Section 179 limit.

You must also track business-use percentage. If it drops to 50% or less, you switch to ADS straight-line and may have to pay back earlier deductions.

Why is MACRS different from the depreciation on financial statements?

MACRS is for taxes only. Accounting rules (GAAP) want depreciation to match how long you really expect to use the asset.

Tax books: MACRS lives and rates set by the IRS, no salvage value, front-loaded deductions.
Financial books: your own estimate of useful life and salvage value, usually straight-line.

This gap creates a temporary difference, which is why companies report deferred taxes.

What is the depreciable basis if you trade in or improve an asset?

Your basis is what you paid plus the costs to get the asset ready to use, like shipping, sales tax, and installation.

Improvements that add value or extend life are not added to the old asset. They start their own new MACRS schedule with their own recovery period.

Trade-ins of business property are no longer tax-free swaps for equipment. You usually treat the trade as a sale and start the new asset at its full cost.