MACRS is the default depreciation system for tangible property placed in service after 1986. It assigns every asset a recovery period (5 years for vehicles and computers, 7 years for office furniture and most equipment, 15 years for land improvements, 27.5 years for residential rentals, 39 years for nonresidential buildings) and a method. Most personal property uses 200% declining balance switching to straight line, which front-loads deductions; real property uses straight line. Conventions control the first-year slice: personal property generally uses the half-year convention, but if more than 40% of the year's additions land in the fourth quarter, the mid-quarter convention applies; buildings use mid-month. Bonus depreciation and Section 179 sit on top of MACRS as accelerators. Whatever is not expensed through those provisions is recovered on the MACRS schedule via Form 4562.
MACRS (Modified Accelerated Cost Recovery System)
Primary authority: IRC §168; Form 4562
The authority behind it
IRC §168; Form 4562
Every entry in this glossary cites the statute, regulation, or IRS guidance behind it.
Worked example
A $10,000 office furniture purchase is 7-year property. Under 200% declining balance with the half-year convention, year-one depreciation is $1,429, year two $2,449, with the remainder recovered over the following six years.
Want the books, the quarterlies, and the filing behind terms like this handled for you?
Talk to UsFree 30-minute review. No pitch deck.
What you get with Amadae
One flat monthly price. Real accountants who know how creators get paid.
- Every payout and 1099 categorized as it lands
- Business costs tracked as write-offs monthly
- Quarterly estimates calculated and set aside before each deadline
- Your return filed by a real accountant, S-corp math included
Free 30-minute review. Cancel any time.
Plans from
$249/mo
If you make $40K - $69K. Flat, no hourly bills.
- Monthly profit and loss reports
Keep reading
Related terms
Bonus Depreciation
Bonus depreciation under IRC Section 168k lets a business deduct the entire cost of qualifying equipment and other...
Read the definition →
Section 179 Expensing
Section 179 lets a business elect to deduct the cost of qualifying equipment, off-the-shelf software, and certain...
Read the definition →
Depreciation Recapture
Depreciation recapture is the rule that claws back prior depreciation deductions when you sell a depreciated asset...
Read the definition →
Cost Segregation
Cost segregation is an engineering-based study that breaks a purchased or constructed building into components that...
Read the definition →
Stop looking terms up one at a time.
Books, estimates, and filing for creators. Flat monthly price.