This article explains how to compute depreciation using either the Modified Accelerated Cost Recovery System (MACRS) or the Accelerated Cost Recovery System (ACRS) method.
- In general, use the MACRS method for assets placed in service after December 31, 1986 and for assets for which MACRS was elected in 1986.
- Use the ACRS method for assets placed in service before 1987 per IRS instructions.
- You don't need to enter a life in Life or Class Life in the Depreciation (4562) screen unless you prefer to use a different life than expressed in the table.
Nonrecovery methods
Nonrecovery methods should be used for amortization and other nonrecovery properties. Don't use any nonrecovery methods (90-97) for assets that should be calculated using an ACRS or MACRS method. See Publication 534 for more details.
Nonrecovery property includes:
- Intangible property
- Property elected for exclusion from ACRS that's properly depreciated under a method of depreciation not based on a term of years
- You can't use ACRS for property placed in service before 1981 or after 1986
- Certain public utility property and certain property acquired and excluded from ACRS because of antichurning rules
- When you use a nonrecovery method, enter the life in Life or Class Life in the Depreciation (4562) screen
Under the General Depreciation System (GDS) method, most tangible property is assigned to one of eight main property classes. The following is a list of the property classes and examples of the types of property included in each class.
- This table provides general guidelines only.
- For a complete discussion on property classes and types of property, see IRS Pub. 946.
- For additional limitations on automobiles and other listed property, see instructions for Form 4562.
| Property Classes and Examples of the Types of Property | MACRS Methods Entry |
| 3-year property a) Tractor units for over-the-road use b) Any race horse over 2 years old when placed in service before Jan. 1, 2009 c) Any other horse over 12 years old when placed in service d) Qualified rent-to-own property | 34 or 35 |
| 5-year property a) Automobiles, taxis, buses and trucks (don't use methods 55 or 56 for automobiles that aren't subject to the limits for passenger automobiles) b) Any qualified technological equipment c) Office machinery (such as typewriters, calculators, and copiers) | 53 or 54 automobile limits not applied 55 or 56 automobile limits applied 45 or 46 truck limits applied 43 or 44 automobile limits not applied, designated as listed property |
| 7-year property a) Office furniture and fixtures (such as desks, files, and safes) b) Any property that doesn't have a class life and hasn't been designated by law as being in any other class | 57 or 58 |
| 10-year property a) Single-purpose agricultural structure b) Vessels, barges, tugs, and similar water transportation equipment c) Fruit- and nut-bearing plants | 64 or 65 |
| 15-year property a) Certain depreciable improvements made directly to land or added to it (such as shrubbery, fences, roads, and bridges) b) Any retail motor fuels outlet, such as a convenience store | 66 or 67 |
| 20-year property a) This class includes farm buildings (other than single-purpose agricultural or horticultural structures) | 68 or 69 |
| Residential rental property This class includes real property such as a rental home or structure (including a mobile home) if 80% or more of its gross rental income for the tax year is from dwelling units. a) A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. It doesn't include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. b) If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. c) The recovery period for this property is 27.5 years. | 85 |
| Nonresidential real property This class includes section 1250 property that is neither of the following: a) Residential rental property (defined in (7)) b) Property with a class life of less than 27.5 years The recovery period for nonresidential real property is: 39 years for property placed in service after May 12, 1993, or 31.5 years for property placed in service before May 13, 1993 | 87 |
| ENTRY | MACRS METHOD | CALCULATION |
| 34 | 3-yr % personal | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 35 | 3-yr SL personal | IRS PUB: Tables 8-12, IRS Pub. 946 CONVENTION: mid-quarter or half-year |
| 43 | 5-yr % personal, automobile limits are not applied Designated as listed property | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 44 | 5-yr % personal, automobile limits are not applied Designated as listed property | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 53 | 5-yr % personal, automobile limits are not applied | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 54 | 5-yr SL personal, automobile limits are not applied | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 55 | >5-yr % automobile limits applied | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year (see listed property limitations) METHOD: 200DB |
| 56 | 5-yr SL automobile limits applied | IRS PUB: Tables 8-12 , IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year (see listed property limitations) |
| 57 | 7-yr % personal | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 58 | 7-yr SL personal | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 64 | 10-yr % personal | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 65 | 10-yr SL personal | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 66 | 15-yr % personal | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year METHOD: 150DB |
| 67 | 15-yr SL property | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 68 | 20-yr % property | IRS PUB: Tables 1-5, IRS Pub. 946 CONVENTION: mid-quarter or half-year METHOD: 150DB |
| 69 | 20-yr SL property | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 41 | 25-yr SL property | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 85 | 27.5 SL Residential RE | IRS PUB: Table 6, IRS Pub. 946 CONVENTION: mid-month |
| 87 | 31.5/39 SL Nonresidential RE | IRS PUB: Table 7, IRS Pub. 946 CONVENTION: mid-month |
| 88 | 50-yr SL Railroad | IRS PUB: Tables 8-12, IRS Pub. 946 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| ENTRY | ACRS METHOD | CALCULATION |
| 30 | 3-yr % automobile | IRS PUB: IRS Pub. 534 percentages (luxury car limitations/listed property automatic) CONVENTION: full year |
| 31 | 3-yr SL automobile | IRS PUB: divides depreciable basis by life (luxury car limitations/listed property automatic) CONVENTION: full year |
| 32 | 3-yr % personal | IRS PUB: IRS Pub. 534 percentages CONVENTION: full year |
| 33 | 3-yr SL personal | IRS PUB: divides depreciable basis by life (and divides by 2 for the first year) CONVENTION: full month |
| 50 | 5-yr personal | IRS PUB: IRS Pub. 534 percentages CONVENTION: full year |
| 51 | 5-yr SL personal | IRS PUB: divides depreciable basis by life (and divides by 2 for the first year) CONVENTION: full month |
| 60 | 10-yr % property | IRS PUB: IRS Pub. 534 percentages CONVENTION: full year |
| 61 | 10-yr SL property | IRS PUB: divides depreciable basis by life (and divides by 2 for the first year) CONVENTION: full month |
| 62 | 15-yr % public utility | IRS PUB: IRS Pub. 534 percentages |
| 63 | 15-yr SL public utility | IRS PUB: divides depreciable basis by the life (and divides by 2 for the first year) |
| 70 | 15-yr % x low income RE | IRS PUB: Table 2, IRS Pub. 534 (if asset was placed in service between 3/16/84 and 5/8/85) or Table 3 (if placed in service after 5/8/85) CONVENTION: full month |
| 71 | 15-yr SL low income RE | IRS PUB: Divide depreciable basis by the life CONVENTION: full month You can use alternate lives of 35 and 45 years. The program doesn't use the table available for these lives but divides the depreciable basis by the life. |
| 80 | 15-yr % Real property | IRS PUB: Table 1, IRS Pub. 534 (for assets placed in service before 3/16/84) CONVENTION: full month |
| 81 | 15-yr SL Real property | IRS PUB: divides depreciable basis by the life CONVENTION: full month |
| 89 | 15-yr SL RE (tables) | IRS PUB: straight-line % instead of dividing by the life |
| 82 | 18/19-yr % RE | IRS PUB: Assets placed in service between 3/16/84 and 5/8/85 should use an 18-year life. Assets placed in service between 3/16/84 and 6/22/84 use Table 5, IRS Pub. 534 Assets placed in service after 5/8/85 have 19-year life and use Table 6, IRS Pub. 534 Assets placed in service between 6/23/84 and 5/8/85 use Table 4, IRS Pub. 534 CONVENTION: assets placed in service between 3/16/84 and 6/22/84: full month; between 6/23/84 and 5/8/85: mid-month; after 5/8/85: mid-month |
| 83 | 18/19 SL RE | IRS PUB: 18-yr assets use Tables 7 and 8, IRS Pub. 534; 19-yr asset use Table 9, IRS Pub. 534 CONVENTION: mid-month Life dates are the same as for method 82 |
| ENTRY | NONRECOVERY | CALCULATION |
| 90 | Half-year | Considers an asset placed in service at the mid-point of the tax year. Divides basis by the life (2 years) and prorates the amount by the number of months held that year. |
| 91 | Straight-Line | Divides basis by the life and prorates the amount by the number of months held that year. An asset is held for the whole month if placed in service before the 16th of the month. |
| 92 | 200% DB | Calculates depreciable basis, subtracts prior depreciation, multiplies the result by 2, divides by the life, and prorates the total by the number of months held that year. An asset is held for the whole month if placed in service before the 16th of the month. |
| 93 | 150% DB | Calculates depreciable basis, subtracts prior depreciation, multiplies the result by 1.5, divides by the life, and prorates the total by the number of months held that year. An asset is held for the whole month if placed in service before the 16th of the month. |
| 94 | 125% DB | Calculates depreciable basis, subtracts prior depreciation, multiplies the result by 1.25, divides by the life, and prorates the total by the number of months held that year. An asset is held for the whole month if placed in service before the 16th of the month. |
| 95 | Units of Production | Divides adjusted basis by beginning reserves multiplied by units produced. |
| 96 | CLADR | No calculation. Must use the override Current Depreciation/amortization (-1=none) [O] in the Regular Depreciation section. |
| 97 | IDC S/L Amort | For oil and gas, calculated IDC expense using 60 month straight-line |
| ENTRY | LAND | CALCULATION |
| 99 | Land | Tracking purposes only |
See also IRS Pub. 946 How to Depreciate Property
