Depreciation Facts
This page contains MACRS depreciation reference materials to help you understand and apply the federal tax rules as they relate to fixed asset depreciation.
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MACRS (Modified Accelerated Cost Recovery System)-
MACRS is a system of recovering the cost of qualifying assets over a period of time as specified by the Internal Revenue code. Qualifying assets are personal property and real property acquired after 1986. Certain assets do not qualify for MACRS depreciation, including intangible assets such as trademarks, patents, goodwill, and off-the-shelf computer software. Instead, intangibles are amortized; goodwill over a 15-year period, and off-the-shelf computer software over a 3-year period.
The MACRS system specifies the recovery period and the depreciation method to be used. Typical asset recovery periods for personal property are 3, 5, 7 10, 15 and 20 years. Typical recovery periods for real property are 27.5, 31.5, and 39 years. Refer to the table below for typical MACRS recovery periods for certain assets. See Rev. Proc. 87-56 (1987-2 CB 674) as modified by Rev Proc. 88-22 (1988-1 CB 785) for the complete table of class lives and recovery periods published by the IRS.
MACRS uses the 200% declining-balance method (with a switch to straight-line in the year it is more advantages) for all personal property except personal property with 15 and 20 year recovery periods. For personal property with 15 and 20 year recovery periods, the 150% declining-balance method is used (switching to straight-line in the year it is more advantages). For real property, the straight-line method of depreciation is used. Salvage value is ignored under MACRS.
In addition, MACRS specifies certain conventions for the first and last years of the recovery period. For personal property, the half-year convention applies. That is, in the year of acquisition and in the last year, a half-year of depreciation is allowed, no matter how long the asset is actually in service during its first or last year. In the year personal property is disposed of, a half-year of depreciation is also allowed. No depreciation is allowed if the asset is both acquired and disposed of during the same tax year.
There is an exception to the half-year convention that applies to all property except real property, and that is called the mid-quarter convention. If more than 40% of the total cost of such personal property is placed in service during the last three months of the tax year, then the mid-quarter convention applies and all property placed in service during any quarter of that tax year is treated as placed in service at the mid-point of such quarter. For purposes of the 40% test, the basis of property which has been expensed under Section 179, and property that was both acquired and disposed of in the same year are excluded. Tables showing the mid-quarter convention are shown at item 5 below.
For real property, the mid-month convention applies. Under this convention, a half-month of depreciation is allowed for the month the real property is acquired, and a half-month is allowed in the final month of the property's recovery period. In addition, a half-month is allowed in the month the real property is disposed. For example, if real property is acquired of during a calendar year on July 1st, 5.5 months of depreciation will be allowed during the first year.
Note that the AMT lives are the same for both regular tax and AMT purposes for assets placed in service in 1999 and later. However, prior to 1999, the AMT lives in most cases were different for AMT purposes than they were for regular tax purposes (see column D below)
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Property Type |
MACRS Recovery Period |
AMT Recovery Period (1999 to Present) |
AMT Recovery Period (1998 & Prior) |
| Autos | 5 Years | 5 Years | 5 Years |
| Trucks-light general purpose (less than 13,000 lbs) | 5 Years | 5 Years | 5 Years |
| Trucks-heavy general purpose (13,000 lbs or more) | 5 Years | 5 Years | 6 Years |
| Boats | 10 Years | 10 Years | 18 Years |
| Computers and peripherals | 5 Years | 5 Years | 5 Years |
| Telephone systems | 5 Years | 5 Years | 5 Years |
| Cellular telephones and PDA's | 5 Years | 5 Years | 6 Years |
| Typewriters, calculators, copiers, fax machines | 5 Years | 5 Years | 6 Years |
| Office furniture - desks, chairs, filing cabinets, safes, etc. | 7 Years | 7 Years | 10 Years |
| Carpets and blinds | 5 Years | 5 Years | 9 Years |
| Race horses, more than 2 years old | 3 Years | 3 Years | 12 Years |
| Breeding or work horses, 12 years old or less | 7 Years | 7 Years | 10 Years |
| Assets used in wholesale and retail trade, and professional services | 5 Years | 5 Years | 9 Years |
| Assets used in construction activities (i.e. by general contractors, real estate subdividers, and developers) | 5 Years | 5 Years | 6 Years |
| Personal property with no class life | 7 Years | 7 Years | 12 Years |
| Land improvements (sidewalks, roads, fences, landscaping) | 15 Years | 15 Years | 20 Years |
| Residental real property | 27.5 Years | 27.5 Years | 40 Years |
| Commercial real property (1/1/87 to 5/12/93) | 31.5 Years | 31.5 Years | 40 Years |
| Commercial real property (5/13/93 to present) | 39 Years | 39 Years | 40 Years |
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Additional Bonus Depreciation Deduction
| Date Placed In Service | Bonus Depreciation % |
| 09/11/2001 to 05/05/2003 | 30 % Bonus Depreciation |
| 05/06/2003 to 12/31/2004 | 50% Bonus Depreciation |
| 01/01/2005 to 12/31/2007 | No Bonus Depreciation |
| 01/01/2008 to 9/08/2010 | 50% Bonus Depreciation |
| 09/09/2010 to 12/31/2011 | 100% Bonus Depreciation |
| 1/1/2012 to 12/31/2013 | 50% Bonus Depreciation |
| 1/1/2014 to 9/27/2017 | 50% Bonus Depreciation |
| 9/28/2017 to 12/31/2022 | 100% Bonus Depreciation |
| 1/1/2023 to 12/31/2023 | 80% Bonus Depreciation |
| 1/1/2024 to 12/31/2024 | 60% Bonus Depreciation |
| 1/1/2025 to 12/31/2025 | 40% Bonus Depreciation |
| 1/1/2026 to 12/31/2026 | 20% Bonus Depreciation |
| 3. Luxury Auto Limits | |||||
| Placed In Service | Year 1 * | Year 2 | Year 3 | Year 4 | |
| 6/18/84 & Before 1/1/80 | $4,000 | $6,000 | $6,000 | $6,000 | |
| After 12/31/84 & Before 4/3/85 | $4,100 | $6,200 | $6,200 | $6,200 | |
| After 4/2/85 & Before 1/1/87 | $3,200 | $4,800 | $4,800 | $4,800 | |
| 1/1/87 To 12/31/88 | $2,560 | $4,100 | $2,150 | $1,475 | |
| 1/9/89 To 12/31/90 | $2,660 | $4,200 | $2,550 | $1,475 | |
| 1/31/91 To 12/31/91 | $2,660 | $4,300 | $2,550 | $1,575 | |
| 1/31/92 To 12/31/92 | $2,760 | $4,400 | $2,650 | $1,575 | |
| 1/1/93 To 12/31/93 | $2,860 | $4,600 | $2,750 | $1,675 | |
| 1/1/94 To 12/31/94 | $2,960 | $4,700 | $2,850 | $1,675 | |
| 1/1/95 To 12/31/95 | $3,060 | $4,900 | $2,950 | $1,775 | |
| 1/1/96 To 12/31/96 | $3,060 | $4,900 | $2,950 | $1,775 | |
| 1/1/97 To 12/31/97 | $3,160 | $5,000 | $3,050 | $1,775 | |
| 1/1/98 To 12/31/98 | $3,160 | $5,000 | $2,950 | $1,775 | |
| 1/1/99 To 12/31/99 | $3,060 | $5,000 | $2,950 | $1,775 | |
| 1/1/00 To 12/31/00 | $3,060 | $4,900 | $2,950 | $1,775 | |
| 1/1/01 To 9/10/01 | $3,060 | $4,900 | $2,950 | $1,775 | |
| 9/11/01 To 5/5/03 | $7,660 | $4,900 | $2,950 | $1,775 | |
| 5/6/03 To 12/31/03 | $10,710 | $4,900 | $2,950 | $1,775 | |
| 1/1/04 To 12/31/04 | $10,610 | $4,800 | $2,850 | $1,675 | |
| 1/1/05 To 12/31/05 | $2,960 | $4,700 | $2,850 | $1,675 | |
| 1/1/06 To 12/31/06 | $2,960 | $4,800 | $2,850 | $1,775 | |
| 1/1/07 To 12/31/07 | $3,060 | $4,900 | $2,850 | $1,775 | |
| 1/1/08 To 12/31/08 | $10,960 | $4,800 | $2,850 | $1,775 | |
| 1/1/09 To 123/31/09 | $10,960 | $4,800 | $2,850 | $1,775 | |
| 1/1/10 To 12/1/10 | $11,060 | $1,900 | $2,950 | $1,775 | |
| 1/1/11 To 12/31/11 | $11,060 | $4,900 | $2,950 | $1,775 | |
| 1/1/12 To 12/31/12 | $11,160 | $5,100 | $3,050 | $1,875 | |
| 1/1/13 To 12/31/13 | $11,160 | $5,100 | $3,050 | $1,875 | |
| 1/1/14 To 12/31/14 | $3,160 | $5,100 | $3,050 | $1,875 | |
| 1/1/15 To 12/31/15 | $11,160 | $5,100 | $3,050 | $1,875 | |
| 1/1/16 To 12/31/16 | $11,160 | $5,100 | $3,050 | $1,875 | |
| 1/1/17 To 12/31/17 | $11,160 | $5,100 | $3,050 | $1,875 | |
| 1/1/18 To 12/31/18 | $18,000 | $16,000 | $9,600 | $5,760 | |
| 1/1/19 To 12/31/19 | $18,000 | $16,000 | $9,600 | $5,760 | |
| 1/1/20 To 12/31/20 | $18,100 | $16,100 | $9,700 | $5,760 | |
| 1/1/21 To 12/31/21 | $18,200 | $16,400 | $9,800 | $5,860 | |
| 1/1/22 To 12/31/22 | $19,200 | $18,000 | $10,800 | $6,460 | |
| 1/1/23 To 12/31/23 | $20,200 | $19,500 | $11,700 | $6,960 | |
| 1/1/24 To 12/31/24 | $20,400 | $19,800 | $11,900 | $7,160 | |
| *Year 1 includes $8,000 bonus | |||||
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179 First-Year Expensing (Not applicable to Estates and Trusts)-
Section 179 allows a taxpayer to expense the cost of qualified assets (tangible personal property) in the year of acquisition rather than capitalizing and depreciating them. The maximum Section 179 allowance is shown below in the table. The maximum dollar limitation shown below is reduced one dollar for every dollar of Section 179 property placed in service during the year in excess the amount shown in the third column.
Tangible personal property (such as stoves, refrigerators, washing machines, etc.) used in a residential rental building (for example: an apartment building, or rental home) does NOT qualify for Section 179 first-year expensing.Maximum Section 179 for SUV's with loaded weights between 6,000 and 14,000 pounds:
Placed in Service: Maximum Section 179 After 10/22/2004 & Before 1/1/2019 $25,000 2019 $25,500 2020 $25,900 2021 $26,200 2022 $26,200 2023 $28,900 2024 $30,500 Section 179 does NOT apply to estates and trusts.
| Year | Maximum | Threshold |
| 1987 To 1982 | $10,000 | $200,000 |
| 1993 To 1996 | $17,500 | $200,000 |
| 1997 | $18,000 | $200,000 |
| 1998 | $18,500 | $200,000 |
| 1999 | $19,000 | $200,000 |
| 2000 | $20,000 | $200,000 |
| 2001 | $24,000 | $200,000 |
| 2002 | $24,000 | $200,000 |
| 2003 | $100,000 | $400,000 |
| 2004 | $102,000 | $410,000 |
| 2005 | $105,000 | $420,000 |
| 2006 | $108,000 | $430,000 |
| 2007 | $125,000 | $500,000 |
| 2008 - 2009 | $250,000 | $800,000 |
| 2010 - 2011 | $500,000 | $2,000,000 |
| 2012 - 2015 | $500,000 | $2,000,000 |
| 2016 | $500,000 | $2,000,000 |
| 2017 | $510,000 | $2,030000 |
| 2018 | $1,000,000 | $2,500,000 |
| 2019 | $1,020,000 | $2,550,000 |
| 2020 | $1,040,000 | $2,590,000 |
| 2021 | $1,050,000 | $2,620,000 |
| 2022 | $1,080,000 | $2,700,000 |
| 2023 | $1,160,000 | $2,890,000 |
| 2024 | $1,220,000 | $3,050.000 |