Depreciation Calculator

These are the IRS rates from Table A-1 in Appendix A of Publication 946 (2025 edition): GDS with the half-year convention, the table most small businesses use. Multiply the asset's unadjusted basis (cost minus any Section 179 deduction and bonus depreciation) by the rate for each tax year; year 1 is the year the asset is placed in service. The 3- through 10-year columns are 200% declining balance and the 15- and 20-year columns are 150% declining balance, with the switch to straight line already built into the rates.

Example: $30,000 of shop machinery (7-year property) placed in service in 2026, with bonus depreciation elected out and no Section 179, gives $4,287 in year 1, $7,347 in year 2, $5,247 in year 3, $3,747 in year 4, $2,679 in years 5 and 7, $2,676 in year 6, and $1,338 in year 8, which adds back to $30,000. The first year goes on Form 4562, Part III, line 19c, and later years on line 17; the Form 4562 instructions guide walks through every line.

Section 179 allows businesses to deduct the full purchase price of qualifying assets in the year they are placed in service, rather than spreading the cost over multiple years. For tax years beginning in 2026, the Section 179 deduction limit is $2,560,000 (raised by the OBBBA in 2025 and indexed in Rev. Proc. 2025-32), reduced dollar for dollar once the Section 179 property you place in service during the year exceeds $4,090,000. Qualifying property includes machinery, equipment, off-the-shelf software, certain vehicles, and qualified improvement property. The Section 179 and bonus depreciation guide compares the three options on the same purchase.

Bonus depreciation is 100% for qualified property acquired after January 19, 2025, and the One Big Beautiful Bill Act of 2025 made that rate permanent, replacing the TCJA step-down (80% in 2023, 60% in 2024, 40% in 2025). Property acquired before January 20, 2025, keeps the old schedule: 20% if it is placed in service in 2026. Unlike Section 179, bonus depreciation has no dollar cap and can create a net operating loss (NOL). Both new and used assets qualify, provided the taxpayer has not previously used the property.

Passenger automobiles (6,000 pounds gross vehicle weight or less) placed in service in 2026 face annual dollar caps under IRC Section 280F, set by Rev. Proc. 2026-15:

The caps shrink with personal use: at 80% business use, the first-year cap with bonus depreciation is $16,240. SUVs rated over 6,000 pounds gross vehicle weight (up to 14,000 pounds) are not subject to these caps, but their Section 179 deduction is limited to $32,000 for 2026 (Rev. Proc. 2025-32), and bonus depreciation can cover the rest of the cost. The business vehicle tax deduction guide compares these rules with the standard mileage rate.

The optimal depreciation approach depends on current taxable income, expected future income, and business cash flow needs. Section 179 is best when the business has sufficient taxable income to absorb the full deduction, since it cannot create a loss. Bonus depreciation works for businesses that want to create or increase an NOL that can be carried forward indefinitely under current law.

Standard MACRS depreciation spreads deductions over the recovery period and is preferable when the business expects significantly higher income in future years. For Form 4562 (Depreciation and Amortization), all three methods can be combined: Section 179 first, then bonus depreciation on the remaining basis, then MACRS on any residual amount.

Listed property (passenger automobiles and other vehicles, plus cameras and other equipment used for entertainment or recreation; computers placed in service after 2017 no longer count) must meet a more-than-50% business use threshold to qualify for Section 179 and bonus depreciation. If business use drops to 50% or below in a later year, the accelerated depreciation claimed above what ADS would have allowed is recaptured as income, and the asset switches to the Alternative Depreciation System (ADS) straight-line method. Selling a depreciated asset triggers a separate calculation, explained in the depreciation recapture guide.

Residential rental property is depreciated over 27.5 years using the straight-line method under MACRS. Nonresidential real property (commercial buildings, offices, retail space) uses a 39-year recovery period. Both use the mid-month convention, which treats the building as placed in service in the middle of its month, so the first-year rate depends on the month (Publication 946, Tables A-6 and A-7a). Land is never depreciable, so subtract the land value from the purchase price first.

Every full year after the first gets 3.636% for residential rental property (3.637% in alternating later years) and 2.564% for nonresidential property, and the final partial year picks up the rest. Example: a $400,000 warehouse building (land excluded) placed in service in March 2026 gives $8,132 for 2026 (2.033%), $10,256 a year for 2027 through 2064 (2.564%), and $2,140 in 2065. Owners of rental buildings carry this depreciation to Schedule E; the rental property tax deductions guide covers the rest of that return.

Qualified Improvement Property (QIP), an improvement to the interior of a nonresidential building made after the building was first placed in service (other than an enlargement, elevator, escalator, or internal structural framework), has a 15-year recovery period, must use the straight-line method, and qualifies for bonus depreciation. This corrected classification, fixed by the CARES Act of 2020, applies retroactively to QIP placed in service after December 31, 2017. Because QIP is straight line, its rates are 3.33% in year 1, about 6.67% in years 2 through 15, and 3.33% in year 16 (Table A-8), so the calculator's 15-year option does not apply to it.

The Alternative Depreciation System is the straight-line version of MACRS. It uses the same conventions as GDS (half-year or mid-quarter for equipment, mid-month for buildings) but generally longer recovery periods, based on each asset's class life in Appendix B of Publication 946.

ADS rates come from Tables A-8 through A-12 (straight line by recovery period) and Tables A-13 and A-13a (30- and 40-year real property). Office furniture on ADS, for example, is depreciated 5% in year 1, 10% in years 2 through 10, and 5% in year 11. ADS is mandatory for:

• listed property, such as a car, used 50% or less for business;
• tangible property used predominantly outside the United States;
• tax-exempt use property and tax-exempt bond-financed property;
• property imported from a country covered by an Executive order for trade restrictions;
• farm property placed in service while an election out of the uniform capitalization rules is in effect;
• nonresidential real property, residential rental property, and qualified improvement property of a real property business that elected out of the section 163(j) business interest limit, and property with a GDS period of 10 years or more held by an electing farming business.

Property that is required to use ADS cannot take bonus depreciation. You can also elect ADS on Form 4562, Part III, line 20: the election covers all property in that class placed in service that year (building by building for real property) and cannot be revoked.