How to calculate depreciation: the methods compared
Spread the cost of an asset over the years you use it. Each method writes off the same $45,000 on the example, with $5,000 left as salvage, but on a different timetable. MACRS is different in one way: it ignores salvage and writes off the full $50,000.
| Year | Straight-line | Double declining | Sum-of-years | Units of production | MACRS 5-year |
|---|---|---|---|---|---|
| 1 | $9,000 | $20,000 | $15,000 | $11,250 | $10,000 |
| 2 | $9,000 | $12,000 | $12,000 | $11,250 | $16,000 |
| 3 | $9,000 | $7,200 | $9,000 | $9,000 | $9,600 |
| 4 | $9,000 | $4,320 | $6,000 | $6,750 | $5,760 |
| 5 | $9,000 | $1,480 | $3,000 | $6,750 | $5,760 |
| 6 | $0 | $0 | $0 | $0 | $2,880 |
- Straight-line: (cost − salvage) ÷ life. It's the same amount every year.
- Declining balance: rate × the start-of-year book value, where double declining uses 2 ÷ life. The calculator switches to straight-line when that's larger, and it never goes below salvage.
- Sum-of-the-years' digits: (cost − salvage) × remaining years ÷ the sum of the years. For 5 years, the sum is 15.
- Units of production: (cost − salvage) ÷ total units × units used that year. This suits assets that wear out with use.
- MACRS: cost × the IRS percentage for that year.
Depreciation calculator for taxes: the MACRS percentage table
Most business property placed in service after 1986 must use MACRS on a federal return, so you can't simply pick your own useful life. Multiply your basis by the percentage for each year. These are the half-year rates from IRS Publication 946, Table A-1, and each column adds to 100%.
| 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 |
Notice that 5-year property takes 6 tax years. The half-year convention treats the asset as placed in service in the middle of the first year, so that year gets half of a full year's depreciation and the last year picks up the rest. A $3,000 computer deducts $600, then $960, and so on down to $173 in year 6.
Which MACRS class does your property fall in?
Publication 946 assigns the class, not you. A few of its examples for the general system:
| Class | Examples |
|---|---|
| 3-year | Tractor units for over-the-road use |
| 5-year | Cars and light trucks, computers and peripheral equipment, and appliances or carpets in a rental |
| 7-year | Office furniture and fixtures such as desks, files, and safes |
| 10-year | Vessels, barges, and tugs |
| 15-year | Land improvements such as shrubbery, fences, and roads, and qualified improvement property |
| 20-year | Farm buildings, other than single-purpose structures |
Depreciation calculator for rental property or a house
A residential rental building uses straight-line over 27.5 years with the mid-month convention, not the table above. You can depreciate the building but not the land. If you pay $350,000 and $75,000 of that is land, your basis is $275,000 (plus or minus other adjustments).
To model this, choose straight-line, set salvage to $0 and life to 27.5, and enter the months for your first year. A building placed in service in July counts as 5.5 months, which gives $4,583 in year 1 and $10,000 each year after that, or 3.636%. That matches the rates in Publication 946's Table A-6, which rounds to three decimals. Nonresidential buildings use 39 years instead. Selling a depreciated rental has its own tax rules, covered in Publication 544, so talk to a tax professional before you sell.
Section 179 and bonus depreciation for 2026
Both let you write off a larger amount in the first year, and this calculator's schedules don't apply either one. For tax years starting in 2026, IRS Rev. Proc. 2025-32 sets the section 179 limit at $2,560,000. It's reduced dollar for dollar once the section 179 property you place in service tops $4,090,000, and certain SUVs are capped at $32,000. The deduction is also limited by your business income.
For bonus depreciation, Publication 946 says the 2025 tax law reinstated a 100% special depreciation allowance for certain qualified property acquired and placed in service after January 19, 2025. It applies unless you elect out. Older property can fall under lower percentages, so the acquisition date matters. Land and many buildings don't qualify for these. Take any amounts out of your basis first, then run MACRS on what remains.
Depreciation traps that cost real money
- Skipping it doesn't save it. The IRS reduces your basis by the depreciation allowed or allowable, whichever is greater. If you never claim it, your basis still falls, and you can pay tax on a larger gain when you sell.
- Depreciation can come back at sale. Gain on section 1245 property, which includes most equipment, is ordinary income up to the depreciation taken. Sell this asset for $20,000 after three years of 5-year MACRS, when your basis is $14,400, and the whole $5,600 gain would be ordinary income.
- The mid-quarter rule. If more than 40% of the year's new property by basis goes into service in the last three months, you must use the mid-quarter convention, and the half-year table here is wrong for you.
- Cars and mixed use. Passenger vehicles have annual dollar limits. If a car or other listed property is used 50% or less for business, you must use the slower alternative system. This tool doesn't model either rule.
- Book isn't tax. Your financial statements can use straight-line while your return uses MACRS. The two schedules are allowed to differ.
Depreciation is reported on Form 4562, and the rules have many exceptions. A tax professional can confirm your class and method. To test whether a purchase is worth making at all, try the NPV calculator, and if you're financing it, the business loan calculator.
Common questions
What is depreciable basis?
It's generally what you paid plus costs to get the asset ready to use, like delivery and installation, less any section 179 or special allowance you claimed. Book methods also subtract salvage value, while MACRS doesn't.
Can I depreciate my car?
Only the business share of it. If you use the standard mileage rate, part of that rate already counts as depreciation, so you don't figure it separately. Otherwise, cars are 5-year property with annual limits on the deduction, and this calculator doesn't apply those limits. It also doesn't estimate what a car would sell for.
Do I have to use MACRS on my taxes?
For most business and investment property placed in service after 1986, yes. Some property is excluded, and you can sometimes elect a different method under MACRS, such as straight-line. Publication 946 lists the details.
Why does the last year look different?
Rounding, or the convention. The calculator's last year clears any cents left over, so the schedule adds up exactly. With plain declining balance and no switch, the final year takes whatever remains, which can be larger than the year before.
Can I start partway through the year?
Yes, for book methods: enter the months in service under advanced options, and the remainder moves into one more year. MACRS already assumes a half year in the first year, no matter which month you started.
Sources
- Publication 946, How To Depreciate Property · Internal Revenue Service
- Revenue Procedure 2025-32, 2026 inflation adjustments · Internal Revenue Service
- Publication 544, Sales and Other Dispositions of Assets · Internal Revenue Service
- Instructions for Form 4562 · Internal Revenue Service