MACRS Depreciation Schedule Explained (2026)

MACRS, the Modified Accelerated Cost Recovery System, is the depreciation method required for nearly all tangible business and rental property placed in service after 1986. It assigns every asset a recovery period, a depreciation method, and a convention that determines how much of the first year you get. Those three inputs produce the percentage tables in IRS Publication 946 that drive the number on your Form 4562.

The Three Inputs That Determine Your Deduction

Every MACRS calculation comes down to the same three decisions, made once when the asset is placed in service:

Recovery period. How many years the asset is written off over, determined by asset class under Rev. Proc. 87-56.
Method. 200 percent declining balance, 150 percent declining balance, or straight line, each switching to straight line when that produces a larger deduction.
Convention. Half year, mid quarter, or mid month, which fixes how much of the first and last year you are allowed to claim.

MACRS Property Classes and Recovery Periods

Class	Method	Convention	Common examples
3 year	200% DB	Half year	Certain tooling, tractor units
5 year	200% DB	Half year	Appliances, carpeting, furniture, computers, vehicles
7 year	200% DB	Half year	Office furniture and fixtures, most machinery
15 year	150% DB	Half year	Land improvements, qualified improvement property
20 year	150% DB	Half year	Certain farm buildings, municipal sewers
27.5 year	Straight line	Mid month	Residential rental buildings
39 year	Straight line	Mid month	Nonresidential real property

Note the dividing line at 20 years. Everything at or below it is eligible for 100 percent bonus depreciation. Everything above it is not. That single threshold is the entire economic argument for cost segregation.

MACRS Percentage Tables

These are the standard half year convention tables for 5, 7, and 15 year property. Multiply the percentage by the asset's original cost basis, not the declining balance.

Year	5 year (200% DB)	7 year (200% DB)	15 year (150% DB)
1	20.00%	14.29%	5.00%
2	32.00%	24.49%	9.50%
3	19.20%	17.49%	8.55%
4	11.52%	12.49%	7.70%
5	11.52%	8.93%	6.93%
6	5.76%	8.92%	6.23%
7		8.93%	5.90%
8		4.46%	5.90%
9 through 15			5.90% to 5.91%
16			2.95%

Two things surprise people reading these tables for the first time. First, a 5 year asset takes six years to fully depreciate, and a 15 year asset takes sixteen. That is the half year convention at work: you get half a year at the start and half a year at the end. Second, the year 2 percentage is larger than year 1 for declining balance property, for the same reason.

Real Property Tables

Residential rental property uses straight line over 27.5 years, which is 3.636 percent per full year. Nonresidential uses 39 years, or 2.564 percent per full year. Both use the mid month convention, so the first year depends on which month the property was placed in service.

Month placed in service	27.5 year first year	39 year first year
January	3.485%	2.461%
April	2.576%	1.819%
July	1.667%	1.177%
October	0.758%	0.535%
December	0.152%	0.107%

A December closing on a $1,000,000 building nets a $1,520 deduction for the year. The same building bought in January nets $34,850. This is why closing dates matter, and why a fourth quarter acquisition often makes a cost segregation study more valuable rather than less: the short life components are not subject to the mid month convention and, with bonus depreciation, are deducted in full regardless of the closing month.

Conventions: Half Year, Mid Quarter, Mid Month

Half year is the default for personal property. Every asset is treated as placed in service at the midpoint of the year regardless of the actual date.

Mid quarter is mandatory if more than 40 percent of the aggregate basis of personal property placed in service during the year falls in the fourth quarter. When it applies, every personal property asset placed in service that year switches to mid quarter, not just the fourth quarter ones. This can materially reduce a first year deduction and is a common late year trap for businesses buying equipment in December.

Mid month applies to all real property. The asset is treated as placed in service at the midpoint of the month.

When You Must Use ADS Instead

The Alternative Depreciation System uses straight line over longer recovery periods and is required in several situations:

Property used 50 percent or less in a qualified business use
Tax exempt use property and tax exempt bond financed property
Property used predominantly outside the United States
Electing real property trades or businesses that opted out of the Section 163(j) business interest limitation

That last one catches real estate operators regularly. Making the 163(j) election to fully deduct business interest requires ADS on residential rental (30 years), nonresidential real property (40 years), and qualified improvement property (20 years). QIP under ADS is 20 years, which is still within the bonus depreciation window, but the building lives get materially longer. Model both paths before electing.

Where MACRS Shows Up on the Return

Depreciation is reported on Form 4562, then flows to Schedule E for rentals, Schedule C for sole proprietors, or the relevant business return. Assets placed in service in the current year are listed by class in Part III. Prior year assets are reported in aggregate on line 17. Listed property, including vehicles, goes in Part V with its own substantiation requirements.

Fixing a Depreciation Error

If an asset has been depreciated using the wrong life or method for two or more consecutive years, that is an impermissible method of accounting, and the fix is Form 3115, not an amended return. The correction is taken as a Section 481(a) adjustment in the year of change. If the error is in a single year only, an amended return is the right tool. See recovering missed depreciation.

Frequently Asked Questions

What does MACRS stand for?

MACRS stands for the Modified Accelerated Cost Recovery System. It is the depreciation system required under IRC Section 168 for most tangible property placed in service after 1986. MACRS assigns each asset a recovery period, a depreciation method, and a convention, which together determine the annual deduction.

What is the MACRS depreciation rate for 5 year property?

Under the half year convention and 200 percent declining balance method, 5 year property is depreciated at 20.00 percent in year one, 32.00 percent in year two, 19.20 percent in year three, 11.52 percent in years four and five, and 5.76 percent in year six. The percentages apply to the original cost basis. Because of the half year convention, 5 year property is written off over six tax years.

Why does 5 year property take six years to depreciate?

The half year convention treats all personal property as placed in service at the midpoint of the tax year, regardless of the actual date. You get half a year of depreciation in the first year, so the remaining half year spills into a sixth tax year. The same logic makes 7 year property take eight years and 15 year property take sixteen.

What is the difference between MACRS and ADS?

MACRS is the general depreciation system, using accelerated methods and shorter recovery periods. ADS, the Alternative Depreciation System, uses straight line depreciation over longer recovery periods. ADS is required for property used 50 percent or less for business, tax exempt use property, property used predominantly outside the United States, and for electing real property trades or businesses that opted out of the Section 163(j) interest limitation.

When does the mid quarter convention apply?

The mid quarter convention is mandatory when more than 40 percent of the total basis of personal property placed in service during the tax year is placed in service during the fourth quarter. When triggered, it applies to every personal property asset placed in service that year, not only the fourth quarter additions, and generally reduces the first year deduction.

What depreciation life applies to a residential rental property?

The building structure of a residential rental property is depreciated straight line over 27.5 years using the mid month convention. Nonresidential real property uses 39 years. Land is never depreciable. Components inside the building that qualify as personal property or land improvements can be depreciated over 5, 7, or 15 years if identified through a cost segregation study.

MACRS Depreciation Schedules Explained: Classes, Methods, and Tables