MACRS Depreciation Calculator

IRS Publication 946, How To Depreciate Property, published February 14, 2024, explains depreciation as follows:

MACRS depreciation calculator with schedules.

• Adheres to IRS Pub. 946.
• Supports Qualified property
• Vehicle maximums
• 100% bonus depreciation
• Safe harbor rules
• Export to XLSX/DOCX files

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Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. It is an allowance for the wear and tear, deterioration, or obsolescence of the property.

In practical terms, depreciation is the method a business uses to expense a portion of an asset’s cost each year during the asset’s recovery period.

There is more below…

Preliminary Details

With other calculators on this site, I provide detailed instructions for their use. That is not possible for the MACRS Depreciation Calculator. As noted earlier, the Internal Revenue Code makes depreciation complex. The arithmetic is straightforward — it can be explained in about half a page. However, the rules governing depreciation span nearly 100 pages across multiple publications. Confirm your understanding (and mine) of the applicable depreciation rules with a qualified income tax professional before filing a return.

Although I have studied depreciation since before MACRS (1986), I am not an income tax professional.

Nonetheless, the guidance below summarizes how to use the calculator. Much of this material comes directly from IRS Publication 946, revised for tax year 2023.

A special note about automobile depreciation. In February 2019, the IRS issued a revenue procedure that “provides a safe harbor method of accounting for determining depreciation deductions for passenger automobiles.” This is important because the safe harbor details do not appear in Publication 946 (as of the edition published in early 2024, “for use in preparing 2023 returns”). Applying the safe harbor rules can result in significantly different depreciation deductions. As of April 13, 2020, this calculator supports the safe harbor depreciation procedure. Thank you to Robert Valentine, CPA, for identifying this issue. Robert publishes a depreciation calculator for Windows. (I have not used it.)

IRS Pub. 946, p. 4:

You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. You also can depreciate certain intangible property, such as patents, copyrights, and computer software.

• It must be property you own.
• It must be used in your business or income-producing activity.
• It must have a determinable useful life.
• It must be expected to last more than one year.

Basis — Basis is often the cost of the asset. Often, but not always. The basis for real estate is always different from the contract purchase price. If you are depreciating real property, you must remove the value of the land. You then add allowable settlement costs to the basis. For example (Pub. 946, pp. 11–12):

• Legal and recording fees.
• Abstract fees.
• Survey charges.
• Owner’s title insurance.
• Amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, and similar charges.

Business Use — If the asset is not used entirely for business, enter the percentage used for business. For example, if the basis is $100,000 and business use is 80%, the adjusted basis for depreciation is $80,000. (The calculator performs this calculation.)

Asset Being Depreciated — This does not affect the calculation. It appears on the printed schedule to identify the asset.

Placed Into Service — The date when the asset is available for use. The business does not need to be using the asset. Once it is available, it is considered in service.

179 Deduction — The basis is reduced by any Section 179 deduction taken.

IRS Pub. 946, p. 2:

What’s New for 2023

Section 179 deduction dollar limits. For tax years beginning in 2023, the maximum section 179 expense deduction is $1,160,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,890,000.

Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2023 is $28,900.

IRS Pub. 946, p. 15:

You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. This is the section 179 deduction. You can elect the section 179 deduction instead of recovering the cost by taking depreciation deductions.

Class Life / Recovery Period —

IRS Pub. 946, p. 31:

The recovery period of property is the number of years over which you recover its cost or other basis. It is determined based on the depreciation system (GDS or ADS) used.

The available recovery periods are determined by the depreciation method selected. The calculator automatically limits the choices to the recovery periods appropriate for the selected method.

In general, recovery periods are longer under ADS than under GDS.

Depreciation Method — Taxpayers may select from four depreciation methods. Three methods fall under GDS and one under ADS. Two GDS methods use a declining balance formula that accelerates the deduction.

IRS Pub. 946, pp. 26–27:

The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions.

Which Depreciation System (GDS or ADS) Applies?

Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS.

IRS Convention — The three conventions establish when the recovery period begins and ends.

IRS Pub. 946, p. 33:

The mid-month convention: Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of.

The mid-quarter convention: Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. This means that one and one-half months of depreciation is allowed for the quarter the property is placed in service or disposed of.

The half-year convention: Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of.

Special Allowance — Calculated. “Qualified Asset” must be set to “Yes” (see below).

IRS Pub. 946, p. 23:

You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. The allowance applies only for the first year you place the property in service. The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service.

Qualified Asset — If the asset is a qualified asset, select the special allowance, including the 100% bonus depreciation where applicable.

Your property is qualified property if it is one of the following:

• Qualified reuse and recycling property.
• Certain qualified property acquired after September 27, 2017.
• Certain plants bearing fruits and nuts.

Is Asset a Vehicle? - when “Yes”, it activates the many rules pertaining to vehicle depreciation, including maximum depreciation deductions.

Type of Vehicle - The vehicle type impacts the amount of the maxiumum depreciation that a taxpayer can deduct each year prior to 2018. After 2017, the maximum depreciation amount is the same for all vehicles. In 2019, the IRS issued a safe harbor ruling for vehicles. If you selects qualified asset 100% bonus depreciation then you should probably select safe harbor rules. But be careful. There are exceptions. For example, you can’t select 100% bonus depreciation and have a 179 expense deduction too.

Listed Asset -

IRS Pub. 946, p. 51:

Listed property is any of the following:

• Passenger automobiles (as defined later).
• Any other property used for transportation, unless it is an excepted vehicle.
• Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment).

Note: The calculator does not create an accurate schedule that includes a short tax year.

IRS Pub. 946, p. 43:

A short tax year is any tax year with less than 12 full months. This section discusses the rules for determining the depreciation deduction for property you place in service or dispose of in a short tax year. It also discusses the rules for determining depreciation when you have a short tax year during the recovery period (other than the year the property is placed in service or disposed of).

Even with the omission of short tax year calculations, users should find the MACRS Depreciation Calculator helpful. Comments and questions are welcome. Feedback helps prioritize future enhancements and calculators.