Question 1

What is MACRS depreciation?

Accepted Answer

MACRS (Modified Accelerated Cost Recovery System) is the tax depreciation method required by the IRS for most business assets placed in service after 1986. It uses predetermined recovery periods and accelerated methods to allow businesses to deduct the cost of assets faster than straight-line depreciation.

Question 2

What is the difference between GDS and ADS?

Accepted Answer

GDS (General Depreciation System) uses shorter recovery periods and accelerated methods, resulting in larger deductions in early years. ADS (Alternative Depreciation System) uses longer recovery periods with straight-line depreciation. GDS is the default for most assets; ADS is required for certain properties like tax-exempt use property.

Question 3

How do I determine the MACRS recovery period for my asset?

Accepted Answer

The IRS assigns recovery periods based on asset class. Common examples: 5-year property (cars, computers, office equipment), 7-year property (office furniture, machinery), 15-year property (land improvements), 27.5 years (residential rental), and 39 years (commercial buildings). IRS Publication 946 contains the complete list.

Question 4

What MACRS convention should I use?

Accepted Answer

Most personal property uses the half-year convention, which assumes the asset was placed in service at the midpoint of the year. If more than 40% of your personal property is placed in service in the last quarter, you must use the mid-quarter convention. Real property always uses the mid-month convention.

Question 5

Can I combine MACRS with bonus depreciation?

Accepted Answer

Yes, bonus depreciation is applied before regular MACRS depreciation. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. This 100% rate continues for 2026 and beyond. You deduct the full cost as bonus depreciation in the first year, then any remaining basis is depreciated using standard MACRS rates over the recovery period. Section 179 limits are also indexed for inflation ($2,560,000 for 2026).

Question 6

Is salvage value used in MACRS calculations?

Accepted Answer

No. Under MACRS, salvage value is always zero. The entire cost of the asset (minus any Section 179 or bonus depreciation) is recovered over the applicable recovery period. This is a key difference from straight-line depreciation used in financial accounting, which typically includes a salvage value.

Years	Asset Types
3	Tractors, rent-to-own property
5	Autos, computers, office equipment
7	Office furniture, fixtures
15	Land improvements, gas stations
27.5	Residential rental property
39	Commercial real property

Years	Asset Types
3	Tractors, rent-to-own property
5	Autos, computers, office equipment
7	Office furniture, fixtures
15	Land improvements, gas stations
27.5	Residential rental property
39	Commercial real property

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1What is MACRS depreciation?

2What is the difference between GDS and ADS?

3How do I determine the MACRS recovery period for my asset?

4What MACRS convention should I use?

5Can I combine MACRS with bonus depreciation?

6Is salvage value used in MACRS calculations?

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Frequently Asked Questions

1What is MACRS depreciation?

2What is the difference between GDS and ADS?

3How do I determine the MACRS recovery period for my asset?

4What MACRS convention should I use?

5Can I combine MACRS with bonus depreciation?

6Is salvage value used in MACRS calculations?

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