The depreciation method is a mandatory entry when using ProConnect Tax to calculate depreciation. This article describes the different depreciation methods and types of property each should be used for.
ACRS / MACRS methods
When you use an ACRS or MACRS method, no entry is needed Life or Class Life unless you prefer to use a different life than expressed in the table. 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 in accordance with the IRS instructions.
Nonrecovery methods
When using a nonrecovery method, the Life or Class life is a mandatory entry.
Under the General Depreciation System (GDS), 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 is provided for general guidance only. For a complete discussion on property classes and types of property please see IRS Pub. 946.
| Property classes and examples of the types of property | MACRS Method entry |
| 1) 3-year property. a) Tractor units for over-the-road use. b) Any race horse over 2 years old when placed in service. c) Any other horse over 12 years old when placed in service. | 34 or 35 |
| 2) 5-year property. a) Automobiles, taxis, buses and trucks. b) Computers and peripheral 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 |
| 3) 7-year property. a) Office furniture and fixtures (such as desks, files, and safes). b) Any property that does not have a class life and has not been designated by law as being in any other class. | 57 or 58 |
| 4) 10-year property. a) Vessels, barges, tugs, and similar water transportation equipment. | 64 or 65 |
| 5) 15-year property. a) Certain depreciable improvements made directly to land or added to it (such as shrubbery, fences, roads, and bridges). b) Service station buildings and other land improvements used in the marketing of petroleum and petroleum products (but not facilities related to petroleum and natural gas trunk pipelines). | 66 or 67 |
| 6) 20-year property. This class includes farm buildings (other than single purpose agricultural or horticultural structures). | 68 or 69 |
| 7) 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 dwelling unit is a house or apartment used to provide living accommodations in a building or structure. It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. 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. The recovery period for this property is 27.5 years. | 85 |
| 8) 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 you placed in service after May 12, 1993, or 31.5 years for property you placed in service before May 13, 1993. | 87 |
*Do not use methods 55 or 56 for automobiles that are not subject to the limits for passenger automobiles.
| Entry | MACRS Method | Calculation |
| 34 | 3 yr % personal | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 35 | 3 yr SL personal | IRS Pub. 946: Tables 8-12 CONVENTION: mid-quarter or half-year |
| 43 | 5 yr % personal, automobile limits are not applied Designated as listed property | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 44 | 5 yr % personal, automobile limits are not applied Designated as listed property | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 53 | 5 yr % personal, automobile limits are not applied | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 54 | 5 yr SL personal, automobile limits are not applied | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 55 | >5 yr % automobile limits applied | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year (see listed property limitations) METHOD: 200DB |
| 56 | 5 yr SL automobile limits applied | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year (see listed property limitations) |
| 57 | 7 yr % personal | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 58 | 7 yr SL personal | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 64 | 10 yr % personal | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year METHOD: 200DB |
| 65 | 10 yr SL personal | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life CONVENTION: mid-quarter or half-year |
| 66 | 15 yr % personal | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year METHOD: 150DB |
| 67 | 15 yr SL property | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 68 | 20 yr % property | IRS Pub. 946: Tables 1-5 CONVENTION: mid-quarter or half-year METHOD: 150DB |
| 69 | 20 yr SL property | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 41 | 25 yr SL property | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| 85 | 27.5 SL Residential RE | IRS Pub. 946: Table 6 CONVENTION: mid-month |
| 87 | 31.5/39 SL Nonresidential RE | IRS Pub. 946: Table 7 CONVENTION: mid-month |
| 88 | 50 yr SL Railroad | IRS Pub. 946: Tables 8-12 (divides depreciable basis by the life) CONVENTION: mid-quarter or half-year |
| Entry | ACRS Method | Calculation |
| 30 | 3 yr % automobile | IRS Pub. 534: percentages(luxury car limitations/listed property automatic) CONVENTION: full year |
| 31 | 3 yr SL automobile | IRS Pub. 534: divides depreciable basis by life (luxury car limitations/listed property automatic) CONVENTION: full year |
| 32 | 3 yr % personal | IRS Pub. 534: percentages CONVENTION: full year |
| 33 | 3 yr SL personal | IRS Pub. 534: divides depreciable basis by life (and divides by 2 for the first year) CONVENTION: full month |
| 50 | 5 yr personal | IRS Pub. 534: percentages CONVENTION: full year |
| 51 | 5 yr SL personal | IRS Pub. 534: divides depreciable basis by life (and divides by 2 for the first year) CONVENTION: full month |
| 60 | 10 yr % property | IRS Pub. 534: percentages CONVENTION: full year |
| 61 | 10 yr SL property | IRS Pub. 534: divides depreciable basis by life (and divides by 2 for the first year) CONVENTION: full month |
| 62 | 15 yr % public utility | IRS Pub. 534: percentages |
| 63 | 15 yr SL public utility | IRS Pub. 534: divides depreciable basis by the life (and divides by 2 for the first year) |
| 70 | 15 yr % x low income RE | IRS Pub. 534: Table 2 (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. 534: Divide depreciable basis by the life CONVENTION: full month You can use alternate lives of 35 and 45 years. The program does not use the table available for these lives but divides the depreciable basis by the life. |
| 80 | 15 yr % Real property | IRS Pub. 534: Table 1 (for assets placed in service before 3/16/84 CONVENTION: full month |
| 81 | 15 yr SL Real property | IRS Pub. 534: divides depreciable basis by the life CONVENTION: full month |
| 89 | 15 yr SL RE (tables) | IRS Pub. 534: straight-line % instead of dividing by the life |
| 82 | 18/19 yr % RE | IRS Pub. 534: 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 Assets placed in service after >5/8/85 have 19 year life and use Table 6 Assets placed in service between 6/23/84 and 5/8/85 use Table 4 CONVENTION: assets placed in service between 3/16/84 and 6/22/84-full monthbetween 6/23/84 and 5/8/85-mid-monthafter 5/8/85-mid-month |
| 83 | 18/19 SL RE | IRS Pub. 534: 18 yr assets use Tables 7 and 8, 19 yr asset use Table 9 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 "Depreciation-Current Year." |
| 97 | IDC S/L Amort | For oil and gas, calculated IDC expense using 60 month straight-line |
| Entry | Land | Calculation |
| 99 | Land or no depreciation | Tracking purposes only. |
