Depreciation Calculator
Calculate business asset depreciation using MACRS (Modified Accelerated Cost Recovery System). Maximize your tax deductions for equipment, vehicles, and property.
Purchase price or basis
Computers, office equipment, cars, light trucks, construction assets
MACRS Details
Total Depreciation
$50,000
over 5 years
Year-by-Year Breakdown
20.00% rate
32.00% rate
19.20% rate
11.52% rate
11.52% rate
5.76% rate
Original Basis
$50,000
Remaining Value
$0
Section 179 & Bonus Depreciation
You may be able to deduct the full cost immediately using Section 179 (up to $1.22M in 2025) or Bonus Depreciation. Consult your tax advisor for eligibility.
What This Calculator Includes
MACRS Method
IRS-approved depreciation
Multiple Property Classes
3, 5, 7, and 15-year assets
Year-by-Year Schedule
Complete depreciation breakdown
Tax Deductions
Maximize business write-offs
Why Use This Calculator?
Plan Tax Deductions
Know exactly how much you can deduct each year for business assets
IRS Compliant
Uses official MACRS rates and methods approved by the IRS
Asset Planning
Make informed decisions about equipment purchases and timing
How MACRS Depreciation Works for Business Assets
The Modified Accelerated Cost Recovery System (MACRS) is the primary depreciation method used by U.S. businesses for tax purposes. Enacted under the Tax Reform Act of 1986, MACRS replaced the older Accelerated Cost Recovery System and applies to virtually all tangible business property placed in service after 1986. Under MACRS, the IRS assigns every depreciable asset to a specific property class based on its useful life, and taxpayers apply predetermined percentage rates from IRS Publication 946 tables each year.
MACRS uses the General Depreciation System (GDS) by default, which applies a 200% declining balance method that switches to straight-line when it produces a larger deduction. The half-year convention treats all assets as placed in service at the midpoint of the year, regardless of actual purchase date. For real property (buildings), the mid-month convention applies instead. Businesses that place more than 40% of their depreciable assets in service during the final quarter must use the mid-quarter convention.
| Property Class | Examples | Year 1 GDS Rate |
|---|---|---|
| 3-Year | Tractor units, qualified rent-to-own | 33.33% |
| 5-Year | Computers, vehicles, office equipment | 20.00% |
| 7-Year | Furniture, fixtures, machinery | 14.29% |
| 15-Year | Land improvements, restaurant property | 5.00% |
| 27.5-Year | Residential rental property | 3.636% |
| 39-Year | Nonresidential real property | 2.564% |
Section 179 Expensing and Bonus Depreciation in 2026
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 the 2026 tax year, the Section 179 deduction limit is $1,320,000, with a phase-out threshold beginning at $3,300,000 in total equipment purchases. Qualifying property includes machinery, equipment, off-the-shelf software, certain vehicles, and qualified improvement property.
Bonus depreciation under the Tax Cuts and Jobs Act is set at 60% for 2026, continuing its annual step-down from 100% in 2022, 80% in 2023, and 60% in 2024-2026. 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. The remaining 40% of the asset cost is depreciated on the normal MACRS schedule.
Passenger vehicles placed in service in 2026 face additional limits under IRC Section 280F. The first-year depreciation cap (including bonus depreciation) is approximately $20,400 for passenger automobiles, with subsequent-year limits of $19,800 (year 2), $11,900 (year 3), and $7,160 per year thereafter. SUVs over 6,000 pounds GVWR qualify for higher Section 179 limits of up to $30,500.
Choosing the Right Depreciation Strategy
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 -- assets that can be used for both business and personal purposes such as vehicles, computers, and cell phones -- 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 any year, previously claimed accelerated depreciation must be recaptured, and the asset switches to the Alternative Depreciation System (ADS) straight-line method.
Real Property Depreciation: Buildings and Improvements
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, meaning the first-year deduction is prorated based on the month the property is placed in service.
Qualified Improvement Property (QIP) -- any improvement to the interior of a nonresidential building after the building is placed in service -- has a 15-year recovery period 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.
| Real Property Type | Recovery Period | Method | Convention |
|---|---|---|---|
| Residential rental | 27.5 years | Straight-line | Mid-month |
| Nonresidential real | 39 years | Straight-line | Mid-month |
| Qualified Improvement | 15 years | GDS 150% DB | Half-year |
| Land improvements | 15 years | GDS 150% DB | Half-year |
Official References
This calculator uses official IRS depreciation methods:
- IRS Publication 946: How to Depreciate Property
Complete guide to MACRS and depreciation methods
- IRS Form 4562: Depreciation and Amortization
Form used to claim depreciation deductions
- Section 179 Deduction
Immediate expensing option for qualifying property
This calculator provides MACRS depreciation estimates. Your actual deductions may vary based on asset type, business use percentage, and tax law changes. Consult a tax professional for personalized advice.
Frequently Asked Questions
How does MACRS depreciation work?
MACRS assigns each business asset to a property class (3, 5, 7, or 15 years) and applies a fixed depreciation rate each year. It uses the 200% declining balance method, which front-loads larger deductions in the early years.
What is the MACRS depreciation table for a 5-year vehicle?
The rates are: Year 1 at 20%, Year 2 at 32%, Year 3 at 19.2%, Year 4 at 11.52%, Year 5 at 11.52%, and Year 6 at 5.76%. Most of the cost is deducted in the first three years. Note that passenger vehicles have additional IRS caps that may limit annual deductions.
What is the Section 179 deduction for 2026?
Section 179 lets you immediately expense up to $1,320,000 of qualifying property (equipment, vehicles, software) instead of depreciating it over multiple years. The deduction phases out when total purchases exceed the IRS spending cap.
What is the bonus depreciation rate for 2026?
Bonus depreciation for 2026 is 60%, down from 80% in 2023 and 100% in 2022. You can deduct 60% of the cost of qualifying new and used assets in year one, then depreciate the remaining 40% on the standard MACRS schedule.
Where can I find IRS depreciation tables?
IRS Publication 946, "How To Depreciate Property," has the complete MACRS percentage tables for all property classes under both GDS and ADS.
Should I use Section 179, bonus depreciation, or regular MACRS?
Section 179 lets you expense the full cost immediately but is capped at your taxable income. Bonus depreciation (60% in 2026) has no income limit and can create a net operating loss. Standard MACRS spreads deductions over time, which is better if you expect higher income in future years. Many businesses combine all three.