MACRS Depreciation Calculator
Enter a cost and choose an asset life to see the depreciation schedule.
Use our free MACRS depreciation calculator to compute the deductible amount for each year of the asset’s life. The IRS’s MACRS depreciation tables are included, along with an explanation of how to use them to calculate MACRS depreciation by hand.
How to use our MACRS depreciation calculator
- Step 1: Enter the cost of your asset. The total cost of purchasing and placing the asset in service, less any amount being deducted as a Section 179 expense or bonus depreciation (accelerated depreciation methods).
- Step 2: Enter the MACRS life of the asset. The life assigned to your asset by the MACRS rules. Most equipment is either a five- or seven-year property. Jump to the how to calculate MACRS depreciation section below for the asset life of commonly used assets.
- Step 3: Identify when the asset was placed in service. Whether 40% or more of all assets sharing the same MACRS life were placed in service in Q4. If the answer is “yes,” the mid-quarter (MQ) convention applies and is used in the depreciation calculation.
- Step 4: Click “Calculate data.” The annual depreciation over the life of the asset is shown by year. You’ll notice that there may appear to be an extra year’s worth of depreciation shown (e.g., a five-year asset will show six years of depreciation), and the additional year accounts for the part-year depreciation in the first and last periods.
How MACRS depreciation works
Depreciation is an accounting procedure used to allocate the cost of an asset over the estimated length of time it is expected to have functional business use. MACRS is an IRS-approved depreciation method that requires businesses to classify assets into categories such as furniture, buildings, machines, and equipment. Many small businesses choose to calculate their book depreciation using MACRS, which is the primary depreciation method used for tax purposes.
Generally, under MACRS methods, more cost is recovered as a deduction in the early years, leaving smaller deductions for the later years. This approach helps reduce taxable income more significantly during the initial period of asset ownership.
For example, if you purchase a computer for $1,500, you generally can’t deduct the entire amount in the same year you buy it — unless it qualifies for an accelerated depreciation method. However, you can deduct a portion of the cost each year using the MACRS depreciation method.
How to calculate MACRS depreciation
Your tax professional should do MACRS depreciation calculations for you when they prepare your tax return. As an alternative, you may consider using tax solutions, such as those on our list of the best tax software for small businesses. However, it’s still useful to understand the basics of MACRS depreciation.
Step 1: Determine the depreciable basis.
The depreciable basis of your new asset is the purchase price plus any costs to place the asset into service, such as shipping and installation. You must reduce your depreciable basis by any amount that’s currently being deducted using either Section 179 expense or bonus depreciation.
Step 2: Determine the life of each asset placed in service during the year.
Determining an asset’s MACRS life is usually pretty straightforward and must be based on IRS guidelines. While the table seems complicated, most assets are either five- or seven-year property.
| Recovery period (Useful life) | Types of business assets (Placed in service after 2018) |
|---|---|
| Three-year property | Over-the-road tractors, race horses, and other horses over 12 years old |
| Five-year property | Cars, taxis, buses, trucks, computers, office machinery, research equipment, breeding cattle, and dairy cattle |
| Seven-year property | Office furniture and fixtures, horses not three-year property, and other property not designated a recovery period—including machinery not listed as five-year property |
| 10-year property | Water transport equipment, single purpose agriculture or horticulture structure, and tree or vine bearing fruits or nuts |
| 15-year property | Land improvements, such as fences, roads, and bridges |
| 20-year property | Farm buildings other than single-purpose agriculture or horticulture |
| (Source: Thomson Reuters) | |
Step 3: Determine whether the MQ convention applies.
Generally, MACRS depreciation is calculated assuming that all assets are placed in service during the middle of the year, referred to as the half-year (HY) convention. However, if 40% or more of the assets in any particular recovery period are placed in service in the last quarter of the year, then all assets for that recovery period are assumed to be placed in service in the middle of whichever quarter they were placed in service.
This may sound a bit confusing, so let’s look at an example of purchased assets during the year:
| Date placed in service | Description | Recovery period | Cost |
|---|---|---|---|
| January 15 | Computer | 5-year | $8,000 |
| November 30 | Printer | 5-year | $2,000 |
| May 4 | Machinery | 7-year | $4,000 |
| October 10 | Equipment | 7-year | $6,000 |
For each recovery period, we need to determine the percentage of assets placed in service during the fourth quarter, which is October 1 through December 31.
| Recovery period | Percentage placed in service in Q4 | MQ or HY convention |
|---|---|---|
| Five-year | 20% | HY |
| Seven-year | 60% | MQ |
- Only $2,000 of the $10,000 in five-year property was placed in service during the fourth quarter, so both the computer and printer will be depreciated using the HY convention.
- Since $6,000 of the $10,000 of the seven-year property was placed in service in the fourth quarter, both the machinery and equipment will be depreciated using the MQ convention.
- Machinery will be depreciated using the MQ table for the second quarter, and equipment will be depreciated using the MQ table for the fourth quarter.
Step 4:
Choose the correct MACRS depreciation table.
The correct depreciation table will depend upon whether the asset must use the HY or MQ convention and, for MQ convention assets, the quarter in which the asset was placed in service.
Assets with a recovery period of three to 20 years using the HY convention can calculate their depreciation for year of their life by multiplying their depreciable basis by the percentages from the following table:
| MACRS Table A-1Half-year Convention | ||||||
|---|---|---|---|---|---|---|
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
| 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% |
| 2 | 44.45% | 32.00% | 24.49% | 18.00% | 9.50% | 7.219% |
| 3 | 14.81% | 19.20% | 17.49% | 14.40% | 8.55% | 6.677% |
| 4 | 7.41% | 11.52% | 12.49% | 11.52% | 7.70% | 6.177% |
| 5 | 11.52% | 8.93% | 9.22% | 6.93% | 5.713% | |
| 6 | 5.76% | 8.92% | 7.37% | 6.23% | 5.285% | |
| 7 | 8.93% | 6.55% | 5.90% | 4.888% | ||
| 8 | 4.46% | 6.55% | 5.90% | 4.522% | ||
| 9 | 6.56% | 5.91% | 4.462% | |||
| 10 | 6.55% | 5.90% | 4.461% | |||
| 11 | 3.28% | 5.91% | 4.462% | |||
| 12 | 5.90% | 4.461% | ||||
| 13 | 5.91% | 4.462% | ||||
| 14 | 5.90% | 4.461% | ||||
| 15 | 5.91% | 4.462% | ||||
| 16 | 2.95% | 4.461% | ||||
| 17 | 4.462% | |||||
| 18 | 4.461% | |||||
| 19 | 4.462% | |||||
| 20 | 4.461% | |||||
| 21 | 2.231% | |||||
| (Source: IRS Publication 946) | ||||||
Assets using the MQ convention must be depreciated according to the MACRS depreciation table for the specific quarter in which the asset was placed in service. The same MQ table must be used throughout the life of the asset.
MQ convention – Assets placed in service in Q1
| MACRS Table A-2Mid-quarter ConventionAssets Placed in Service in First Quarter | ||||||
|---|---|---|---|---|---|---|
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
| 1 | 58.33% | 35.00% | 25.00% | 17.50% | 8.75% | 6.563% |
| 2 | 27.78% | 26.00% | 21.43% | 16.50% | 9.13% | 7.000% |
| 3 | 12.35% | 15.60% | 15.31% | 13.20% | 8.21% | 6.482% |
| 4 | 1.54% | 11.01% | 10.93% | 10.56% | 7.39% | 5.996% |
| 5 | 11.01% | 8.75% | 8.45% | 6.65% | 5.130% | |
| 6 | 1.38% | 8.74% | 6.76% | 5.99% | 4.746% | |
| 7 | 8.75% | 6.55% | 5.90% | 4.459% | ||
| 8 | 1.09% | 6.55% | 5.91% | 4.459% | ||
| 9 | 6.56% | 5.90% | 4.459% | |||
| 10 | 6.55% | 5.91% | 4.459% | |||
| 11 | 0.82% | 5.90% | 4.459% | |||
| 12 | 5.91% | 4.460% | ||||
| 13 | 5.90% | 4.459% | ||||
| 14 | 0.74% | 4.460% | ||||
| 15 | 4.459% | |||||
| 16 | 4.460% | |||||
| 17 | 4.459% | |||||
| 18 | 4.460% | |||||
| 19 | 4.459% | |||||
| 20 | 4.460% | |||||
| 21 | 0.565% | |||||
| (Source: IRS Publication 946) | ||||||
MQ convention – Assets placed in service in Q2
| MACRS Table A-3Mid-Quarter ConventionAssets Placed in Service in Second Quarter | ||||||
|---|---|---|---|---|---|---|
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
| 1 | 41.67% | 25.00% | 17.85% | 12.50% | 6.25% | 4.688% |
| 2 | 38.89% | 30.00% | 23.47% | 17.50% | 9.38% | 7.148% |
| 3 | 14.14% | 18.00% | 16.76% | 14.00% | 8.44% | 6.612% |
| 4 | 5.30% | 11.37% | 11.97% | 11.20% | 7.59% | 6.116% |
| 5 | 11.37% | 8.87% | 8.96% | 6.83% | 5.658% | |
| 6 | 4.26% | 8.87% | 7.17% | 6.15% | 5.233% | |
| 7 | 8.87% | 6.55% | 5.91% | 4.841% | ||
| 8 | 3.34% | 6.55% | 5.90% | 4.478% | ||
| 9 | 6.56% | 5.91% | 4.463% | |||
| 10 | 6.55% | 5.90% | 4.463% | |||
| 11 | 2.46% | 5.91% | 4.463% | |||
| 12 | 5.90% | 4.463% | ||||
| 13 | 5.91% | 4.463% | ||||
| 14 | 5.90% | 4.463% | ||||
| 15 | 5.91% | 4.462% | ||||
| 16 | 2.21% | 4.463% | ||||
| 17 | 4.462% | |||||
| 18 | 4.463% | |||||
| 19 | 4.462% | |||||
| 20 | 4.463% | |||||
| 21 | 1.673% | |||||
| (Source: IRS Publication 946) | ||||||
MQ convention – Assets placed in service in Q3
| MACRS Table A-4Mid-Quarter ConventionAssets Placed in Service in Third Quarter | ||||||
|---|---|---|---|---|---|---|
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
| 1 | 25.00% | 15.00% | 10.71% | 7.50% | 3.75% | 2.813% |
| 2 | 50.00% | 34.00% | 25.51% | 18.50% | 9.63% | 7.289% |
| 3 | 16.67% | 20.40% | 18.22% | 14.80% | 8.66% | 6.742% |
| 4 | 8.33% | 12.24% | 13.02% | 11.84% | 7.80% | 6.237% |
| 5 | 11.30% | 9.30% | 9.47% | 7.02% | 5.769% | |
| 6 | 7.06% | 8.85% | 7.58% | 6.31% | 5.336% | |
| 7 | 8.86% | 6.55% | 5.90% | 4.936% | ||
| 8 | 5.53% | 6.55% | 5.90% | 4.566% | ||
| 9 | 6.56% | 5.91% | 4.460% | |||
| 10 | 6.55% | 5.90% | 4.460% | |||
| 11 | 4.10% | 5.91% | 4.460% | |||
| 12 | 5.90% | 4.460% | ||||
| 13 | 5.91% | 4.461% | ||||
| 14 | 5.90% | 4.460% | ||||
| 15 | 5.91% | 4.461% | ||||
| 16 | 3.69% | 4.460% | ||||
| 17 | 4.461% | |||||
| 18 | 4.460% | |||||
| 19 | 4.461% | |||||
| 20 | 4.460% | |||||
| 21 | 2.788% | |||||
| (Source: IRS Publication 946) | ||||||
MQ convention – Assets Ppaced in service in Q4
| MACRS Table A-5Mid-Quarter ConventionAssets Placed in Service in Fourth Quarter | ||||||
|---|---|---|---|---|---|---|
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
| 1 | 8.33% | 5.00% | 3.57% | 2.50% | 1.25% | 0.938% |
| 2 | 61.11% | 38.00% | 27.55% | 19.50% | 9.88% | 7.430% |
| 3 | 20.37% | 22.80% | 19.68% | 15.60% | 8.89% | 6.872% |
| 4 | 10.19% | 13.68% | 14.06% | 12.48% | 8.00% | 6.357% |
| 5 | 10.94% | 10.04% | 9.98% | 7.20% | 5.880% | |
| 6 | 9.58% | 8.73% | 7.99% | 6.48% | 5.439% | |
| 7 | 8.73% | 6.55% | 5.90% | 5.031% | ||
| 8 | 7.64% | 6.55% | 5.90% | 4.654% | ||
| 9 | 6.56% | 5.90% | 4.458% | |||
| 10 | 6.55% | 5.91% | 4.458% | |||
| 11 | 5.74% | 5.90% | 4.458% | |||
| 12 | 5.91% | 4.458% | ||||
| 13 | 5.90% | 4.458% | ||||
| 14 | 5.91% | 4.458% | ||||
| 15 | 5.90% | 4.458% | ||||
| 16 | 5.17% | 4.458% | ||||
| 17 | 4.458% | |||||
| 18 | 4.459% | |||||
| 19 | 4.458% | |||||
| 20 | 4.459% | |||||
| 21 | 3.901% | |||||
| (Source: IRS Publication 946) | ||||||
Step 5: Calculate depreciation.
You can now calculate depreciation for each year of your asset’s life by multiplying the depreciable basis by the rate in the table.
Let’s calculate the depreciation for our machinery from Step 3. Recall that it was purchased for $4,000 and was placed in service during the second quarter. We determined in Step 3 that the machinery is subject to the MQ convection, so we must use MACRS Table A-3. The depreciation for each is shown in the table below.
| Example Machinery Depreciation ScheduleMid-Quarter ConventionPlaced in Service May 4 (Q2) | |||
|---|---|---|---|
| Year | Depreciable basis | Table A-3 | MACRS depreciation deduction |
| 1 | 4,000 | 17.85 | 714.00 |
| 2 | 4,000 | 23.47 | 938.80 |
| 3 | 4,000 | 16.76 | 670.40 |
| 4 | 4,000 | 11.97 | 478.80 |
| 5 | 4,000 | 8.87 | 354.80 |
| 6 | 4,000 | 8.87 | 354.80 |
| 7 | 4,000 | 8.87 | 354.80 |
| 8 | 4,000 | 3.34 | 133.60 |
MACRS depreciation formula examples
Using the MARCS tables is recommended for computing MACRS depreciation. However, understanding how these values are calculated can be beneficial if you plan to create custom depreciation spreadsheets or a MACRS calculator.
I’ll show how the values for five-year property in the HY convention table are calculated.
Year 1 depreciation
MACRS depreciation is generally calculated using the double declining balance method, with a switch to straight-line depreciation.
- The “double” refers to using double the straight-line rate.
- The “declining balance” refers to multiplying the rate by the remaining asset basis at the beginning of each year.
- The “switch to straight-line” means we use the greater of the double declining balance rate or the straight-line depreciation calculated over the assets remaining life.
Year 1 depreciation is calculated as the straight-line depreciation rate times 200%. However, since we use the HY convention in the first year, we must divide the full-year depreciation by two.
The first year depreciation for a five-year asset with a cost of $100 is:
($100 ÷ 5) × 200% = $40 (full-year depreciation)
$40 ÷ 2 = $20 (half-year depreciation)
Notice that this $20 first-year depreciation agrees to the 20% depreciation rate given in the half-year table for a five-year property.
Year 2 depreciation
Second-year depreciation is calculated by dividing the remaining basis of the asset by the original useful life and then doubling it. The year 2 depreciation for our example $100 asset can be calculated as follows:
$100 (cost) − $20 (prior depreciation) = $80 (remaining basis)
$80 × 40% = $32 (year 2 depreciation)
Notice the $32 matches the 32% rate given in the five-year column for year 2.
Year 3 depreciation
The third year of depreciation is calculated the same as the second year.
$100 (cost) − $52 (prior depreciation) = $48 (remaining basis)
$48 × 40% = $19.20 (year 3 depreciation)
Notice the $19.20 matches the 19.2% rate for the third year of five-year assets in the table.
Years 4-6 depreciation
Using the double declining balance method we’re now familiar with, year 4 depreciation can be calculated as follows:
$100 (cost) − $71.20 (prior depreciation) = $28.80 (remaining basis)
$28.80 × 40% = $11.52 (depreciation)
Now, let’s check the straight-line rate over the remaining life to see if it’s time to make a switch to the straight-line rate.
$28.80 (remaining basis) ÷ 2.5 years (remaining life) = $11.52 (straight-line)
The straight-line rate is exactly the same as the double declining balance rate, so we make the switch to straight-line in year 4 and continue using the straight-line rate in years 5 and 6. Notice that the $11.52 matches the table for years 4 and 5, and then year 6 takes the remaining half-year depreciation or $5.76.
The following table summarizes the double declining balance and straight-line depreciation we’ve calculated and highlights the switch to the straight-line rate in year 4.
| Double declining balance (Remaining basis × 40%) | Straight-line (Remaining basis or life) | |
|---|---|---|
| Year 1 | $20.00 | $10 |
| Year 2 | $32.00 | $17.78 |
| Year 3 | $19.20 | $13.71 |
| Year 4 | $11.52 | $11.52 |
| Year 5 | $11.52 | |
| Year 6 | $5.76 |
Frequently asked questions (FAQs)
Is MACRS depreciation mandatory?
MACRS is required for income tax purposes for most depreciable property except for property placed in service before 1987, property owned or used in 1986, intangible property, films, videotapes, and records, certain corporate or partnership property, or property you elected to be excluded from MACRS.
Why is MACRS depreciation better than the straight-line method?
Under MACRS, you can deduct higher depreciation during the first few years of the asset’s life, thus receiving your tax benefit sooner than with straight-line depreciation.
What is the purpose of MACRS?
MACRS, an accelerated depreciation method, allows taxpayers to receive the tax benefit of purchasing assets faster than using straight-line depreciation. By providing accelerated tax benefits, lawmakers hope that taxpayers will invest more in assets.
How do I calculate MACRS depreciation?
To calculate MACRS depreciation, first determine your asset’s IRS-defined property class and recovery period. Then, apply the corresponding MACRS percentage from the IRS depreciation tables to the asset’s original cost each year.
How do you calculate 5-year asset depreciation using MACRS?
To calculate MACRS depreciation for a 5-year asset, multiply the asset’s original cost by the IRS-provided MACRS depreciation percentage for each year. Continue applying these annual percentages from the MACRS 5-year property table until the asset is fully depreciated.
Is there a MACRS function in Excel?
Yes, Excel has a built-in MACRS depreciation function called VDB, which calculates depreciation using variable declining balance methods.
Bottom line
Calculating depreciation can be a tricky business. For some business owners, depreciation calculations will come naturally. If you still feel a little lost, you’re not alone. For many, it makes sense to trust a professional accountant to take care of depreciation and other small business bookkeeping needs.
