The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method used for U.S. federal income tax purposes. MACRS applies to most business assets placed into service after 1986.

MACRS consists of two systems:

In most cases, taxpayers use GDS unless specifically required to use ADS. However, taxpayers can elect to use ADS instead of GDS. The decision to make the election will depend upon the circumstances.

General Depreciation System (GDS) Basics

The general depreciation system offers three types of depreciation methods:

Most business property is eligible for the 200% DB method, which provides the greatest depreciation expense in the early years of the asset’s life. Real property assets (resident and nonresidential) must use the straight-line depreciation method.

The company’s basis for depreciation in the asset is generally the property’s cost or other basis multiplied by its business use.

Example of 200DB for Office Equipment

Company A, a corporation, purchases office equipment for $5,000, which is used 100% for business purposes. The corporation’s basis in the asset for depreciation purposes is $5,000 ($5,000 times 100%). The equipment was purchased and placed into service on March 15, 2023.

The company will depreciate the asset using the 200% DB method. The office equipment is 5-year property; therefore, the company will use the MACRS 200DB 5-year recovery period table.

Per the MACRS tables, the 5-year asset is depreciated the following amounts for each year.

  • Year 1: 20%
  • Year 2: 32%
  • Year 3: 19.20%
  • Year 4: 11.52%
  • Year 5: 11.52%
  • Year 6: 5.76%

For the 2023 tax year, the corporation claims $1,000 of depreciation expense on the asset (i.e., 20% times $5,000 basis = $1,000). For the 2024 tax year, the corporation claims $1,600 of depreciation expense on the asset (i.e., 32% times $5,000 = $1,600).

The full depreciation by year for the asset is the following:

  • Year 1: $1,000
  • Year 2: $1,600
  • Year 3: $960
  • Year 4: $576
  • Year 5: $576
  • Year 6: $288
More Information

Taxpayers can reference IRS Publication 946 (How to Depreciate Property) for more information on MACRS and the various depreciation rules for U.S. federal tax purposes.