Asset Depreciation Calculator: Tax Deduction Framework (2026)
Calculate depreciation using MACRS and other accounting methods. Track book value, plan tax deductions, and optimize your asset recovery strategy.
IRS Asset Class Recovery Periods
Personal Property Categories
- 3-Year:Tractor units, certain manufacturing tools, racehorses over 2 years old
- 5-Year:Automobiles, trucks, computers, office equipment, appliances, cattle
- 7-Year:Office furniture, fixtures, agricultural machinery, railroad track
- 10-Year:Vessels, barges, water transportation equipment, single-purpose structures
- 15-Year:Land improvementsโsidewalks, roads, fencing, parking lots, landscaping
- 20-Year:Farm buildings, municipal sewers, certain utility property
MACRS assigns specific recovery periods based on asset type. Selecting the correct class is essential for tax compliance.
Real Property Categories
- 27.5-Year:Residential rental property (apartments, rental homes)โuses Straight-Line
- 39-Year:Commercial buildings, offices, retailโuses Straight-Line with mid-month convention
- Note:Land itself is never depreciable; only improvements and structures qualify
Buildings and structural components use longer recovery periods with mid-month convention.
MACRS Percentage Tables
Year-by-Year Depreciation Rates (Half-Year Convention)
- 5-Year Property:Year 1: 20.00% | Year 2: 32.00% | Year 3: 19.20% | Year 4: 11.52% | Year 5: 11.52% | Year 6: 5.76%
- 7-Year Property:Year 1: 14.29% | Year 2: 24.49% | Year 3: 17.49% | Year 4: 12.49% | Years 5-7: ~8.9% each
- Key Feature:Rates automatically switch from 200% DB to Straight-Line when beneficial
These are the IRS-published rates used for tax depreciation calculations.
Immediate Expensing Alternatives
Section 179 vs. Bonus Depreciation (2026)
- Section 179:Expense up to $1.16 million immediatelyโrequires sufficient taxable income to absorb the deduction
- Bonus Depreciation:60% first-year deduction on qualifying property (decreasing 20% annually through 2027)
- Combination Strategy:Apply Section 179 first, then Bonus on remaining basis, then standard MACRS
- When to Use MACRS:Spreading deductions is better when income varies year-to-year or you expect higher future tax rates
For maximum first-year deductions, consider these alternatives to standard MACRS depreciation.
Depreciation Calculator FAQ
? What is MACRS and why is it the default method?
MACRS (Modified Accelerated Cost Recovery System) is the IRS-mandated depreciation method for most business assets in the United States. It uses predetermined recovery periods and percentage tables that provide accelerated deductions. MACRS is the default because it's what you'll use on your tax returnโother methods like Straight-Line are primarily for financial statement (book) purposes.
? What is the difference between Straight-Line and Declining Balance depreciation?
Straight-Line spreads the cost evenly over the asset's useful life, giving you the same deduction each year. Declining Balance (150% or 200%) front-loads the deductions, giving you larger write-offs in the early years and smaller ones later. MACRS combines 200% Declining Balance with a switch to Straight-Line when it becomes more advantageous.
? Why does MACRS ignore salvage value?
Under MACRS rules, salvage value is always treated as $0 for tax purposesโyou can depreciate the full cost of the asset. This differs from book depreciation (GAAP), where you subtract expected salvage value before calculating depreciation. The IRS simplified the system by eliminating salvage value considerations.
? How do I calculate actual tax savings from depreciation?
Multiply your depreciation deduction by your marginal tax rate. For example: $10,000 depreciation ร 25% tax bracket = $2,500 actual tax savings. This calculator shows tax savings based on the tax bracket you enter, helping you understand the real cash flow benefit of your depreciation deductions.
? What is the "Half-Year Convention" and when does it apply?
The half-year convention assumes all assets are placed in service at the midpoint of the year, regardless of actual purchase date. It's the default convention for most MACRS property. You can only claim half the normal depreciation in Year 1, with the remaining half claimed in the year after the recovery period ends. Special rules apply if more than 40% of assets are placed in service in Q4 (mid-quarter convention).
? Can I change my depreciation method after the first year?
Generally, noโonce you elect a depreciation method, you must continue using it for that asset's entire life. MACRS automatically switches from Declining Balance to Straight-Line when beneficial. For book depreciation changes, you may need to file IRS Form 3115 (Change in Accounting Method). Consult a tax professional before making changes.