MACRS Depreciation Calculator + MACRS Tables and How To Use

This article is part of a larger series on Bookkeeping.

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1. 1 How MACRS Depreciation Works
2. 2 How to Calculate MACRS Depreciation
3. 3 MACRS Depreciation Tables
4. 4 Bottom Line

Our free MACRS depreciation calculator will provide your deduction for each year of the asset’s life. We also include the MACRS depreciation tables from the IRS and an explanation of how to use them to calculate modified accelerated cost recovery system (MACRS) depreciation by hand. Recording depreciation on your books is an important bookkeeping task and many small businesses choose to calculate their book depreciation using MACRS.

You need the following information to use our calculator:

• Asset cost: The total cost of purchasing and placing the asset in service, less any amount being deducted as a Section 179 expense or bonus depreciation. Learn more in our articles on what Section 179 deduction is and what bonus depreciation is.
• MACRS life: The life assigned to your asset by the MACRS rules is discussed in our our MACRS depreciation guide. Most equipment is either a five- or seven-year property.
• Quarter: The quarter the asset was placed in service.
• Percentage placed in service in the fourth quarter: Indicate whether 40% or more of all assets with the same MACRS life as this asset were placed in service in the fourth quarter. If so, our calculator will calculate your MACRS depreciation expense automatically using the required mid-quarter convention.

Instead of depreciating your asset purchase using MACRS, you may qualify to deduct all or a portion of the purchase immediately. Section 179 allows many businesses to deduct the full cost of certain assets, up to $1,080,000 for assets purchased in 2022. Another option is bonus depreciation, which allows for a 100% immediate deduction of certain assets.

How MACRS Depreciation Works

MACRS is the primary depreciation method used for tax purposes. MACRS allows you to take a larger tax deduction in the early years of an asset and less in later years. Depreciation is an important element of fixed asset accounting, and many very small businesses use MACRS to record depreciation on their books and tax returns.

For additional insights, check out our comprehensive depreciation guide and fixed asset accounting guide.

When you purchase an asset for business (such as equipment, software, or even buildings), you typically cannot write off the entire cost of the asset in the year of purchase. Rather, the IRS allows you to deduct only a portion of the cost each year over the number of years the asset is expected to last.

For example, if you purchase a computer for $1,500, you generally can’t deduct the entire $1,500 in the same year that you purchase the computer unless it qualifies for bonus depreciation or Section 179. However, you can deduct a portion of the cost each year using the MACRS depreciation method.

It’s very time consuming to calculate MACRS depreciation by hand for each of your fixed assets. We recommend these 5 best fixed asset management software that will automatically calculate and record depreciation for you.

How To Calculate MACRS Depreciation

I recommend that your tax professional do MACRS depreciation calculations for you when the tax return is prepared. Also, you may considering using tax solutions, such as those covered in our list of the best tax software for small businesses. However, it’s still good for you to understand the basics of MACRS depreciation.

Step 1: Determine the Depreciable Basis

The depreciable basis of your new asset is the purchase price plus any costs to place the asset into service, such as shipping and installation. You must reduce your depreciable basis by any amount that’s being currently deducted as either Section 179 expense or bonus depreciation.

Step 2: Determine the Life of Each Asset Placed in Service During the Year

Determining the MACRS life of an asset is usually pretty straightforward and must be based on IRS guidelines versus your own estimate. While the table seems complicated, most assets are either five-year or seven-year property.

Cars, taxis, buses, trucks, computers, office machinery, research equipment, breeding cattle, and dairy cattle

Office furniture and fixtures, horses not three-year property, and other property not designated a recovery period—including machinery not listed as five-year property

Water transport equipment, single purpose agriculture or horticulture structure, and tree or vine bearing fruits or nuts

Step 3: Determine Whether the Mid-quarter (MQ) Convention Applies

Generally, MACRS depreciation is calculated assuming that all assets are placed in service during the middle of the year, referred to as the half-year (HY) convention. However, if 40% or more of the assets in any particular recovery period are placed in service in the last quarter of the year, then all assets for that recovery period are assumed to be placed in service in the middle of whichever quarter they were placed in service.

It may be a bit confusing, so let’s look at an example of purchased assets during the year: