MACRS Depreciation Calculator

MACRS is not one formula. It fixes a depreciable basis, assigns the asset a recovery period and a convention, and then gives a set percentage for each year:

$D_k = B \times p_k$

• $B$ — depreciable basis: purchase price plus capitalised closing and installation costs, minus land, which never depreciates
• $p_k$ — the published percentage for year $k$ of that asset class
• $D_k$ — the deduction for year $k$; the percentages sum to $100\%$

Two families cover most inputs. Residential rental property is straight line over 27.5 years on the mid-month convention, so a full year is $B/27.5$ and the first and last years are prorated by the month placed in service. Equipment in the 5- and 7-year classes uses 200% declining balance switching to straight line, under the half-year convention: the first year and the extra final year each get half a year of deduction whatever the actual purchase date.

Recovery periods, conventions and any bonus provisions are set by tax authorities and change over time. Enter the class, basis and date that apply to your asset; this page does the arithmetic on those inputs. It is a math tool, not tax advice.

Declining balance

The 200% declining-balance rate for a recovery period of $L$ years is

$d = \frac{2}{L}$

applied each year to the remaining book value, never to the original basis:

$D_k = d\left(B - \sum_{j<k} D_j\right)$

For 5-year property $d = 40\%$. Halved in year one that is the familiar $20\%$, then $32\%$, then $19.2\%$.

The switch to straight line

Declining balance never reaches zero, so MACRS switches to straight line in the first year that straight line over the remaining life gives the larger deduction. For 5-year property the crossover lands in year 4 — which is exactly why the table reads $11.52\%,\; 11.52\%,\; 5.76\%$: one flat amount spread across the remaining 2.5 years.

Conventions

Book accounting uses a different method again, straight line net of salvage, $D = (B - S)/L$. MACRS ignores salvage entirely.

• Depreciating the land: only the building is depreciable. Allocate the purchase price between land and improvements before you start, or every year is wrong.
• Applying the declining-balance rate to the original basis: it applies to the remaining book value, which is what makes the deduction shrink.
• Subtracting salvage under MACRS: the tables already run to zero. Salvage belongs to straight-line book depreciation, not to the tax schedule.
• Forgetting the extra year: half-year property in a 5-year class produces deductions in six calendar years, not five. Stopping at year 5 leaves $5.76\%$ unclaimed.
• Confusing the recovery period with how long you keep the asset: the class life is fixed by the rules, not by your plans.
• Treating the schedule as the end of the story: selling a depreciated asset raises separate recapture questions that depend entirely on your jurisdiction.