Calculate your MACRS depreciation schedule by entering your asset basis, business use percentage, recovery period, depreciation method, and IRS convention. You'll get a full year-by-year depreciation schedule showing the annual depreciation amount, accumulated depreciation, and remaining book value for each year of the asset's life.
Year 1 Depreciation
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Depreciable Basis
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Total Depreciation
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Recovery Period
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MACRS stands for Modified Accelerated Cost Recovery System. It is the standard method of depreciation used in the United States for federal income tax purposes, established by the Tax Reform Act of 1986. MACRS allows businesses to recover the cost of qualifying property over a specified recovery period using accelerated depreciation rates set by the IRS.
Yes, MACRS is generally required for depreciating business assets placed in service after 1986 for U.S. federal income tax reporting. However, businesses may elect the Alternative Depreciation System (ADS), which uses longer recovery periods and the straight-line method. ADS is mandatory for certain listed property and assets used outside the U.S.
MACRS uses accelerated declining-balance methods (200% or 150% DB) which allow larger deductions in the early years of an asset's life. This accelerates your tax savings, improving cash flow. The time value of money means a tax deduction taken today is worth more than the same deduction taken years from now.
MACRS uses three conventions: the Half-Year Convention (treats all property as placed in service mid-year, used for most personal property), the Mid-Quarter Convention (used when more than 40% of depreciable property is placed in service in the last quarter of the year), and the Mid-Month Convention (used for real property like residential rental and nonresidential real property).
The IRS assigns recovery periods based on asset class. Common examples: 3-year for small tools and racehorses; 5-year for cars, computers, and office machinery; 7-year for office furniture and most equipment; 15-year for land improvements; 27.5-year for residential rental property; and 39-year for nonresidential real property. Refer to IRS Publication 946 for a complete listing.
First, determine your depreciable basis (cost × business use %). Then apply the MACRS rate for each year based on your recovery period, depreciation method (200% DB, 150% DB, or SL), and IRS convention. The declining-balance method switches to straight-line in the year when SL yields a higher deduction. IRS publishes percentage tables in Publication 946 to simplify this calculation.
GDS (General Depreciation System) is the default MACRS system, using the 200% or 150% declining-balance method with shorter recovery periods for faster deductions. ADS (Alternative Depreciation System) uses the straight-line method over longer recovery periods. ADS is required for listed property used 50% or less for business, assets used outside the U.S., and certain tax-exempt use property.
The business use percentage reduces your depreciable basis to reflect only the portion of the asset used for business. For example, if you purchase a $10,000 computer and use it 70% for business, your depreciable basis is $7,000. If business use of listed property (like vehicles) falls to 50% or below, you must switch to the straight-line ADS method.