MACRS Depreciation Calculator

MACRS stands for Modified Accelerated Cost Recovery System. It is the most common depreciation method used in the U.S. for tax purposes. MACRS allows businesses to recover the cost of certain assets over a specified recovery period using accelerated depreciation rates.

What Is MACRS Depreciation?

MACRS is a system defined by the IRS that assigns depreciation schedules to different asset types. Each asset falls into a property class (e.g., 3-year, 5-year, 7-year, 15-year), which determines its recovery period.

The IRS also provides percentages to apply each year, rather than requiring users to calculate depreciation manually.

MACRS Depreciation Formula

MACRS generally uses declining balance switching to straight-line. The formula depends on the method and IRS percentage tables. Here's a simplified approach using Declining Balance Method:

Formula for Declining Balance Depreciation:

${\text{Depreciation}}_{\text{year}}={\text{Book Value}}_{\text{beginning of year}}\times \left(\frac{\text{Depreciation Rate}}{100}\right)$

Book Value Update Formula:

${\text{Book Value}}_{\text{end of year}}={\text{Book Value}}_{\text{beginning of year}}-{\text{Depreciation}}_{\text{year}}$​​​​​​​

Example: MACRS 5-Year Property with Half-Year Convention

• Asset Cost = $10,000
• Recovery Period = 5 years
• Depreciation Method = 200% DB
• Convention = Half-Year

Based on IRS MACRS tables for 200% DB and Half-Year Convention, the percentages are:

Total Depreciation:

$\text{Total Depreciation}=2000+3200+1920+1152+1152+576=10000$

So, after 6 years, the asset will be fully depreciated.

Notes:

• MACRS tables are pre-calculated by IRS — the calculator pulls these internally.
• Half-year convention assumes assets are placed in service mid-year, which spreads depreciation across 6 years for 5-year property.
• You don’t need to calculate rates manually — use IRS MACRS tables.

Why Use a MACRS Depreciation Calculator?

• Automatically applies IRS-approved schedules.
• Helps in tax filing and forecasting.
• Prevents manual errors.
• Quickly shows yearly depreciation and remaining book value.