MACRS Depreciation Calculator
MACRS (Modified Accelerated Cost Recovery System) is the depreciation method required by the IRS for most business assets placed in service after 1986. Unlike straight-line depreciation used in financial reporting, MACRS front-loads deductions into the early years of an asset's life, reducing taxable income more in the years closest to the purchase. The IRS publishes fixed percentage tables for each recovery class and convention. This calculator applies the half-year convention tables from IRS Publication 946 to compute the exact tax depreciation for each year of the recovery period.
MACRS depreciation formula
Annual Deduction = Cost Basis * MACRS Percentage (from IRS table)
5-year half-year convention: Year 1: 20.00%, Year 2: 32.00%,
Year 3: 19.20%, Year 4: 11.52%, Year 5: 11.52%, Year 6: 5.76%
Example: 5-year asset with $25,000 cost basis. Year 1 deduction = $25,000 * 20.00% = $5,000. Year 2 = $25,000 * 32.00% = $8,000. Note that a 5-year class asset has 6 tax years of deductions due to the half-year convention.
How MACRS works in practice
- MACRS uses the half-year convention for personal property: assets are treated as placed in service on July 1 regardless of actual date.
- The mid-quarter convention applies if more than 40% of your personal property is placed in service in the last quarter of the year.
- Real property (buildings) uses a mid-month convention and straight-line over 27.5 years (residential) or 39 years (commercial).
- Bonus depreciation and Section 179 can be used in addition to MACRS to accelerate deductions further.
Frequently asked questions
What is MACRS depreciation?
MACRS (Modified Accelerated Cost Recovery System) is the standard method of depreciation for US federal income tax purposes, introduced by the Tax Reform Act of 1986. It uses IRS-specified recovery periods and declining balance rates to accelerate deductions in early years.
What are the MACRS recovery classes?
The main MACRS recovery classes are 3-year (tractor units, racehorses), 5-year (computers, autos, light trucks), 7-year (office furniture, most machinery), 10-year (vessels, single-purpose agriculture structures), 15-year (roads, fences, certain improvements), and 20-year (farm buildings, municipal sewers).
What is the half-year convention?
Under the half-year convention, all property placed in service during a tax year is treated as placed in service at the midpoint of that year. This means you get only half a year of depreciation in year 1, regardless of when the asset was actually purchased.
How are MACRS percentages determined?
MACRS uses 200% declining balance for 3, 5, 7, and 10-year property, and 150% declining balance for 15 and 20-year property, switching to straight-line when that yields a larger deduction. The IRS publishes the exact percentages in Rev. Proc. 87-57 and Publication 946.
Can I use Section 179 with MACRS?
Yes. Section 179 allows you to immediately expense up to the annual IRS limit of qualifying property in the year of purchase. Any cost above the Section 179 limit is depreciated using MACRS over the appropriate recovery period.
Official sources
- IRS Publication 946: How to Depreciate Property.
- IRS Rev. Proc. 87-57: MACRS percentage tables (reproduced in IRS Publication 946 Appendix A).
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.