MACRS is a depreciation system that’s used to calculate depreciation for most property that was placed in service in from 1987 onwards. Placed in service essentially means put in use.

MACRS stands for Modified Accelerated Cost Recovery System and this depreciation is usually calculated after accounting for any Sec 179 depreciation (depreciation for property used in trade/business) and/or bonus depreciation (first year depreciation).

Below is a MACRS depreciation table with common types of property along with their recovery period aka useful life under the General Depreciation System (GDS) and the Alternative Depreciation System (ADS), calculation convention and depreciation methods (for more detail about depreciation methods check out this post) that would apply along with a calculation example.

This is not intended as legal, accounting, financial or tax advice and you should not use the information without seeking professional advice.

I’ve used the following sources to collate this table:
Publication 946 (2015), How To Depreciate Property
Publication 225 Farmer’s Tax Guide (IRS)

As particulars get updated from time to time, please refer to the IRS publications for up-to-date information.

Property (1987+) MACRS

Useful life (GDS)

Useful life (ADS)

Convention

Depreciation Method (GDS as ADS only uses straight line)

Calculation (GDS)

Real Property

Qualified: leasehold improvement property, restaurant property and retail improvement property

15 years

39 years

Mid-month

Straight line

Basis ÷ useful life x period in service based on convention. (Basis is the original cost of property, adjusted for factors such as depreciation)

Residential rental. 80% rents from dwelling units, not transient like motel, hotel. If you occupy for personal use, gross rental income includes fair rental you occupy.

27.5 years

40 years

Mid-month

Straight line

Basis ÷ useful life x period in service based on convention

Nonresidential real estate e.g. office building

39 years

40 years

Mid-month

Straight line

Basis ÷ useful life x period in service based on convention

Personal property

Most race horses, Other horse > 12 years old, Tractor for over-the-road use, Qualified rent-to-own property

3 years

5 years if rent-to-own placed in service before August 6, 1997; For rent-to-own property only: 4 years

Mid-year or Mid-quarter* (see note at end of this table)

200% declining

Adjusted basis x (2/3) x period in service based on convention

Computers and office machinery like calculators and copiers. Cars and most commercial vehicles used on roads. Research and experimentation equipment. Fittings and furniture used in residential rental real estate activity. Certain alternative entry property e.g. solar cells.

5 years

5 years

Mid-year or Mid-quarter

200% declining

Adjusted basis x (2/5) x period in service based on convention

Office furniture and fittings e.g. desks. Railroad track. Any other property that doesn’t have a class life stated and not otherwise classified. Natural gas line after April 11, 2005. Certain motorsports entertainment complex property before January 1, 2017.

7 years

12 years; Natural gas gathering lines 14 years.

Mid-year or Mid-quarter

200% declining

Adjusted basis x (2/7) x period in service based on convention

Water vessels and water transportation equipment. Petroleum processing equipment. Food & tabacco manufacturing. Qualified small electric meter and qualified smart electric grid system placed in service on or after October 3, 2008.

10 years

15 years

Mid-year or Mid-quarter

200% declining

Adjusted basis x (1.5/10) x period in service based on convention

Convenience stores to motor fuel outlet. Data communication plants. Sewage treatment plants. Billboards. Initial clearing and grading land improvements for gas utility property. Natural gas distribution lines. Electric transmission property.

15 years

Initial clearing and grading land improvements for gas utility property - 20 years; Electric transmission property - 30 years; Natural gas distribution lines - 35 years.

Mid-year or Mid-quarter/td>

150% declining

Adjusted basis x (1.5/15) x period in service based on convention

Initial clearing and grading land improvements for electric utility. Transmission and distribution plants. Municipal sewers not classified as 25 year property.

20 years

25 years

Mid-year or Mid-quarter

150% declining

Adjusted basis x (1.5/20) x period in service based on convention

Farm Property - You can use ADS (straight line) or choose ADS/GDS using straight line

Farm building but not single purpose agricultural or horticultural

20 years

25 years

Mid-year or Mid-quarter

150% declining balance

Adjusted basis x (1.5/20) x period in service based on convention

Agricultural machinery and equipment.

7 years

10 years

Mid-year or Mid-quarter

150% declining balance

Adjusted basis x (1.5/7) x period in service based on convention

Single purpose agricultural or horticultural structure

10 years

15 years

Mid-year or Mid-quarter

150% declining balance

Adjusted basis x (1.5/10) x period in service based on convention

Breeding and dairy cattle

5 years

7 years

Mid-year or Mid-quarter

150% declining balance

Adjusted basis x (1.5/5) x period in service based on convention

Tree/vine bearing fruits/nuts (straight line only)

10 years

20 years

Mid-year or Mid-quarter

Straight line

Basis ÷ 10 x period in service based on convention

Other ADS property

High technology telephone station equipment installed on customer premises OR High technology medical equipment

N/A

5 years

Mid-year or Mid-quarter

Straight line

Basis ÷ 5 x period in service based on convention

Note that the mid-quarter convention applies if > 40% of all property put in place in the tax year is in the last ¼ of the year.

You’ll notice above that there’s two types of depreciation recovery periods: GDS and ADS.

Most property will use GDS (General Depreciation System) however ADS (Alternative Depreciation System) can be elected and is required by certain groups.

You’ll be required to use the Alternative Depreciation System if your property is:

• Listed property (for example, cars and other property used for transportation, property used for entertainment, and certain computers) is used < 50% for a business purpose
• Tangible property (that’s property that can be touched) used mainly outside the US during the year
• Tax-exempt property
• Tax-exempt bond-financed property
• Used mainly in farming business and placed in any tax year where an election not to apply the uniform capitalization rules to farms costs is in effect.
• Some imported property where in such countries trade restrictions or discriminatory acts exist.

You’ll also note that some property are not included in the table above. For certain property, you cannot use MACRS to depreciate it.

Such property is:

• Property placed in service before 1987
• Intangible property (that’s property that not physical e.g. copyright)
• Films, video tapes and recordings
• Certain corporate or partnership property acquired in a nontaxable transfer
• Property that was elected to be excluded from MACRS.

Hope you found this post useful and please comment below…