MACRS Depreciation Calculator + MACRS Tables and How To Use
Tim is a Certified QuickBooks Time (formerly TSheets) Pro, QuickBooks ProAdvisor, and CPA with 25 years of experience. He brings his expertise to Fit Small Business’s accounting content.
This article is part of a larger series on Bookkeeping.
Our free MACRS depreciation calculator will provide your deduction for each year of the asset’s life. We also include the MACRS depreciation tables from the IRS and an explanation of how to use them to calculate modified accelerated cost recovery system (MACRS) depreciation by hand. Recording depreciation on your books is an important bookkeeping task and many small businesses choose to calculate their book depreciation using MACRS.
You need the following information to use our calculator:
- Asset cost: The total cost of purchasing and placing the asset in service, less any amount being deducted as a Section 179 expense or bonus depreciation.
- MACRS life: The life assigned to your asset by the MACRS rules is discussed more here. Most equipment is either a five- or seven-year property.
- Quarter: The quarter the asset was placed in service.
- Percentage placed in service in the fourth quarter: Indicate whether 40% or more of all assets with the same MACRS life as this asset were placed in service in the fourth quarter. If so, our calculator will calculate your MACRS depreciation expense automatically using the required mid-quarter convention.
Instead of depreciating your asset purchase using MACRS, you may qualify to deduct all or a portion of the purchase immediately. Section 179 allows many businesses to deduct the full cost of certain assets, up to $1,080,000 for assets purchased in 2022. Another option is bonus depreciation, which allows for a 100% immediate deduction of certain assets.
How MACRS Depreciation Works
MACRS is the primary depreciation method used for tax purposes. MACRS allows you to take a larger tax deduction in the early years of an asset and less in later years. Depreciation is an important element of fixed asset accounting, and many very small businesses use MACRS to record depreciation on their books and tax returns.
When you purchase an asset for business (such as equipment, software, or even buildings), you typically cannot write off the entire cost of the asset in the year of purchase. Rather, the IRS allows you to deduct only a portion of the cost each year over the number of years the asset is expected to last.
For example, if you purchase a computer for $1,500, you generally can’t deduct the entire $1,500 in the same year that you purchase the computer unless it qualifies for bonus depreciation or Section 179. However, you can deduct a portion of the cost each year using the MACRS depreciation method.
Whether you use MACRS depreciation, straight line depreciation, or another method, you will need to create and save a depreciation schedule for all fixed assets. Bench makes this easy. You’ll have the schedule that you and your CPA or tax accountant need to make tax time a breeze. Get a free trial consultation today.
How To Calculate MACRS Depreciation
I recommend that you let your tax software or your tax professional do MACRS depreciation calculations for you when the tax return is prepared. However, it’s still good for you 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 being currently deducted as either Section 179 expense or bonus depreciation.
Step 2: Determine the Life of Each Asset Placed in Service During the Year
Determining the MACRS life of an asset is usually pretty straightforward and must be based on IRS guidelines versus your own estimate. While the table seems complicated, most assets are either five-year or seven-year property.
Recovery Period (Useful Life) | Types of Business Asset (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 Mid-quarter (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.
It may be 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 During the Fourth Quarter | Mid-Quarter (MQ) or Half-Year (HY) Convention |
|---|---|---|
5-year | 20% | HY |
7-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-1 Half-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 Quarter 1
MACRS Table A-2 Mid-quarter Convention Assets 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 Quarter 2
MACRS Table A-3 Mid-Quarter Convention Assets 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 Quarter 3
MACRS Table A-4 Mid-Quarter Convention Assets 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 Placed in Service in Quarter 4
MACRS Table A-5 Mid-Quarter Convention Assets 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)
You can now calculate depreciation for each year of the life of your asset by taking the depreciable basis times the rate from 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 Schedule Mid-Quarter Convention Placed in Service May 4 (2Q) | |||
|---|---|---|---|
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 |
Frequently Asked Questions (FAQs)
Is MACRS depreciation mandatory?
MACRS is required for income tax purposes for most depreciable property except for the following: 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 is an accelerated depreciated method that 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.
Bottom Line
Calculating depreciation can be a tricky business. For some business owners, depreciation calculations will come naturally. But if you still feel a little lost, you’re not alone. For many business owners, it makes sense to just trust a professional accountant to take care of depreciation and other small business bookkeeping needs.
If you need a bookkeeper to help with depreciation schedules and other bookkeeping needs, we recommend Bench. Its experts will keep track of your books and coordinate directly with your CPA/tax accountant to provide them with the info they need to file your tax return, or Bench will file the return for you. Plans start at $299 per month, and you can get a free trial consultation (and a free set of financial statements for your business).
