MACRS Depreciation in 2026: Classes, Methods and Conventions

By AE Tax Advisors · Published 2026-08-15

Updated November 8, 2026.

A MACRS schedule needs more than an asset's purchase price and a tax year. Identify the property class, business-use basis, placed-in-service date, applicable system and convention. Then calculate any Section 179 deduction and additional first-year depreciation before depreciating the remaining basis.

Start with the asset rather than a target deduction

Common GDS recovery periods include five years for computers and many residential-rental appliances; seven years for office furniture; and 15 years for qualifying land improvements. Industry-specific asset classes can change the result. New qualifying farm machinery, for example, should not be assigned seven years merely because older machinery used that period.

Residential rental buildings generally use 27.5-year GDS treatment and nonresidential real property generally uses 39 years. Determine the dwelling-unit and transient-use classification independently of the seven-day passive-activity exception. Land is not depreciable. A roof, fence and appliance purchased together are not necessarily one depreciation asset.

Apply the method that fits the property

Many three-, five-, seven- and ten-year GDS assets use 200% declining balance, switching to straight line when appropriate. Fifteen- and 20-year property generally uses 150% declining balance. Buildings generally use straight line. Statutory exceptions and elections can change the method; the category name alone does not resolve every asset.

Illustration: five-year property using 200% declining balance and the half-year convention, without Section 179 or bonus and with no early disposition, uses percentages of 20%, 32%, 19.2%, 11.52%, 11.52% and 5.76% over six tax years. A $10,000 basis therefore produces $2,000 in the first year under those assumptions.

Test the convention before selecting a table

• Half-year: generally applies to relevant personal property unless another convention applies.
• Mid-quarter: generally applies when more than 40% of the tested basis is placed in service during the final three months. The test excludes specified property, including qualifying buildings and property placed in service and disposed of in the same year, and adjusts for Section 179.
• Mid-month: generally applies to residential rental and nonresidential real property, giving a half-month allowance in the month of service or disposition.

A mid-quarter result changes the convention for property subject to that rule, not every asset in the business. A building does not switch from mid-month because equipment purchases trigger mid-quarter treatment. Follow the current instructions for the basis used in the test.

Check whether ADS is required

The Alternative Depreciation System generally uses straight line and its applicable recovery periods. Mandatory ADS can arise from specified foreign use, tax-exempt use, financing, listed-property business-use limits and other circumstances. An electing real-property trade or business generally must use ADS for its nonresidential real property, residential rental property and qualified improvement property; the election does not put every asset it owns into ADS.

Mandatory ADS property generally is excluded from bonus depreciation. A voluntary ADS election and other special situations need their own eligibility review. Do not make a broad interest-limitation election without modeling the affected assets, financing and future consequences.

Bonus depreciation is an additional eligibility test

The restored 100% allowance generally applies to qualifying property acquired and placed in service after January 19, 2025. A recovery period of 20 years or less is one common eligibility element, not proof that every such asset qualifies. Acquisition rules, prior use, related parties, mandatory ADS and elections can change the outcome. Older acquisitions may follow transitional rates.

Use Section 179 first where elected and allowable, then bonus, then regular depreciation on the balance. Preserve the asset ledger even when the remaining depreciable basis is zero: dispositions, changes in business use and recapture still matter.

See five-year asset classification and Section 179 versus bonus. Review your purchase and service-date ledger before finalizing the return.

Frequently Asked Questions

Sources and update notes

Source references and the changes described in this guide were checked November 8, 2026. Published by AE Tax Advisors; see our editorial policy. Examples are illustrative and require review of your records before filing.

• IRS Publication 946: methods, conventions and eligible property
• IRS Notice 2026-11: additional first-year depreciation guidance