MACRS Depreciation Calculator
Calculate MACRS depreciation for business assets. Supports 5-year, 7-year, and 15-year property classes with half-year convention and bonus depreciation options.
Business & Self-Employment Tax Guide HubMACRS (Modified Accelerated Cost Recovery System) is the IRS-mandated depreciation method for most business assets placed in service after 1986. It lets you recover the cost of business property over a set number of years using accelerated deductions that front-load the tax benefit — reducing your taxable income more in the early years of ownership.
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What Is MACRS?
MACRS replaced the Accelerated Cost Recovery System (ACRS) as the required depreciation method for US federal tax purposes. Under MACRS, each asset is assigned to a property class with a specific recovery period. Assets in shorter classes recover their cost faster and generate larger early-year deductions.
MACRS uses accelerated depreciation methods — primarily 200% declining balance (switching to straight-line when that becomes more favorable) for most personal property, and 150% declining balance for 15-year and 20-year property. This is more favorable than straight-line depreciation, which spreads deductions evenly.
GDS vs. ADS
MACRS offers two systems:
General Depreciation System (GDS) — the default. Provides shorter recovery periods and uses accelerated methods. This is what most businesses use.
Alternative Depreciation System (ADS) — required in specific circumstances (listed property not used predominantly for business, assets used outside the US, certain tax-exempt use property, and certain farming property). ADS uses longer recovery periods and straight-line depreciation. Some taxpayers also elect ADS voluntarily to create a more even deduction stream.
Property Class Lives
Under GDS, every asset falls into one of these recovery classes:
| Property Class | Examples | Method |
|---|---|---|
| 3-year | Certain racehorses, special tools | 200% DB |
| 5-year | Computers, cars, light trucks, research equipment | 200% DB |
| 7-year | Office furniture, fixtures, most machinery and equipment | 200% DB |
| 10-year | Vessels, single-purpose agricultural structures | 200% DB |
| 15-year | Land improvements (fences, sidewalks, roads), retail motor fuel outlets | 150% DB |
| 20-year | Farm buildings, municipal wastewater treatment plants | 150% DB |
| 27.5-year | Residential rental property | Straight-line |
| 39-year | Commercial real property, office buildings | Straight-line |
When in doubt, the IRS Revenue Procedure 87-56 provides the complete asset class table. If an asset doesn't appear in any class, it defaults to 7-year GDS property.
The Half-Year Convention
MACRS applies a half-year convention to all personal property (non-real property), regardless of when during the year you actually place the asset in service. This means:
- In year 1, you get a half year of depreciation (as if the asset was placed in service on July 1)
- In the final year of recovery, you also get a half year
- This extends the recovery period by one year (a 5-year property takes 6 calendar years to fully depreciate)
Mid-quarter convention exception: If more than 40% of all personal property is placed in service during the last three months of your tax year, you must use the mid-quarter convention instead, which assigns each asset a quarter-year in year 1 based on the actual quarter placed in service.
Real property uses the mid-month convention: depreciation begins on the 15th of the month placed in service.
MACRS Depreciation Example: $50,000 Equipment
Assume you purchase a $50,000 piece of manufacturing equipment (7-year MACRS property) with no bonus depreciation or Section 179 elected. Using GDS with the half-year convention:
| Year | MACRS Rate | Depreciation |
|---|---|---|
| 1 | 14.29% | $7,145 |
| 2 | 24.49% | $12,245 |
| 3 | 17.49% | $8,745 |
| 4 | 12.49% | $6,245 |
| 5 | 8.93% | $4,465 |
| 6 | 8.92% | $4,460 |
| 7 | 8.93% | $4,465 |
| 8 | 4.46% | $2,230 |
| Total | $50,000 |
Notice that years 1 and 2 alone account for nearly 39% of the total deduction — this accelerated front-loading is why MACRS is so valuable for cash flow.
Bonus Depreciation
Bonus depreciation allows you to deduct a percentage of an asset's cost immediately in the year of purchase, rather than spreading it over the MACRS recovery period.
Phase-down schedule (TCJA):
| Year | Bonus Depreciation Rate |
|---|---|
| 2022 | 100% |
| 2023 | 80% |
| 2024 | 60% |
| 2025 | 40% |
| 2026 | 40% (extended under OBBBA) |
| 2027+ | 20% |
Bonus depreciation applies to new and used qualifying property. It's not limited by taxable income (unlike Section 179) and can create a net operating loss that carries forward.
Example: That same $50,000 piece of 7-year equipment with 40% bonus depreciation in 2026:
- Bonus depreciation: $50,000 × 40% = $20,000 deducted immediately
- Remaining basis: $30,000 depreciated over 7 years using MACRS rates
Section 179 Expensing
Section 179 allows you to immediately expense the full cost of qualifying business property rather than depreciating it. Key limits for 2026:
- Dollar limit: $1,220,000
- Phase-out: Begins when total qualifying property placed in service exceeds $3,050,000 (dollar-for-dollar phase-out)
- Taxable income limit: Section 179 deduction cannot exceed your net taxable business income for the year (unlike bonus depreciation, it cannot create a loss — though the excess carries forward)
Section 179 applies to tangible personal property, off-the-shelf software, qualified improvement property, and (with limits) certain vehicles.
Vehicle limitation: Passenger automobiles used for business face a "luxury auto" cap that limits annual depreciation — even with Section 179 and bonus depreciation combined.
Interaction: Bonus Depreciation vs. Section 179
| Feature | Bonus Depreciation | Section 179 |
|---|---|---|
| Dollar limit | None | $1,220,000 |
| Taxable income limit | None (can create NOL) | Yes — cannot exceed business income |
| New vs. used property | Both | Both |
| Elected | Automatic (opt out allowed) | Must elect |
| Vehicle limits | Subject to luxury auto caps | Subject to luxury auto caps |
Many businesses combine both: use Section 179 first (up to the taxable income limit), then apply bonus depreciation to the remainder, ensuring no NOL is created while still maximizing the immediate deduction.
For a complete explanation of property classes, conventions, and strategies, read our MACRS Depreciation Guide.
Disclaimer: This calculator is for informational purposes only and does not guarantee tax accuracy. Depreciation rules involve complex elections and interactions that vary by asset type, business structure, and year. Consult a qualified tax professional before making depreciation decisions.