Summary: MACRS assigns each business asset a recovery period (3 to 39 years), a depreciation method, and a convention, producing the year-by-year write-off schedule in IRS Publication 946. In 2026, 100% bonus depreciation is back permanently for qualifying property acquired after January 19, 2025, and Section 179 allows expensing up to $2,560,000 (phasing out above $4,090,000 placed in service). Residential rental buildings use 27.5 years straight line; equipment typically uses 5 or 7 years with 200% declining balance.
How MACRS depreciation works
MACRS, the Modified Accelerated Cost Recovery System, is the only depreciation method most businesses may use for assets placed in service after 1986. Instead of writing off an asset over its real useful life, you assign it to a recovery period from IRS tables and apply a prescribed method and convention. The result is usually faster write-offs than economic depreciation, which is exactly the point: Congress designed MACRS to encourage investment.
Three choices drive every MACRS calculation. The recovery period is the number of years (3, 5, 7, 10, 15, 20, 27.5, or 39) based on the asset type. The method is 200 percent declining balance for 3, 5, 7, and 10-year property, 150 percent declining balance for 15 and 20-year property, and straight line for 27.5 and 39-year real property, with an automatic switch to straight line when it yields a bigger deduction. The convention is half-year for most personal property (you get half a year of depreciation in the first and last year no matter when you bought the asset), mid-quarter if more than 40 percent of your year's additions went in service in the fourth quarter, and mid-month for real property.
Then come the two first-year accelerators that can dwarf the MACRS schedule itself. Bonus depreciation is back at 100 percent, permanently, for qualifying property acquired after January 19, 2025 under the One Big Beautiful Bill Act, so most equipment bought in 2026 can be fully expensed in year one. Section 179 lets you expense up to $2,560,000 of qualifying property in 2026 (phasing out above $4,090,000 placed in service), but unlike bonus it cannot create a business loss. Most planners apply Section 179 first, then bonus depreciation to what remains.
Worked example
A landlord buys $50,000 of 5-year appliances and fixtures for a rental in 2026 and takes 100 percent bonus depreciation. First-year deduction: the full $50,000. Without bonus, the MACRS schedule would be $10,000 in year 1 (20 percent), $16,000 in year 2 (32 percent), $9,600 in year 3 (19.2 percent), $5,760 in year 4 (11.52 percent), $5,760 in year 5 (11.52 percent), and $2,880 in year 6 (5.76 percent), the half-year convention's tail.
A $400,000 residential rental building placed in service in March 2026 is 27.5-year property with the mid-month convention: year 1 is $400,000 times 2.879 percent = $11,516, and each full year is $400,000 times 3.636 percent = $14,544. Real property cannot take bonus depreciation or Section 179, so the schedule runs its full course.
MACRS recovery periods and rates, 2026
Rates below are the IRS Publication 946 half-year convention tables for personal property and the mid-month tables for real property. Download the rate tables as CSV.
| Recovery period | Method | Convention | Typical assets |
|---|---|---|---|
| 3-year | 200% declining balance | Half-year | Software, tools, racehorses |
| 5-year | 200% declining balance | Half-year | Computers, office equipment, vehicles |
| 7-year | 200% declining balance | Half-year | Office furniture, fixtures, machinery |
| 10-year | 200% declining balance | Half-year | Watercraft, single-purpose farm structures |
| 15-year | 150% declining balance | Half-year | Land improvements, service station buildings |
| 20-year | 150% declining balance | Half-year | Farm buildings, municipal sewers |
| 27.5-year | Straight line | Mid-month | Residential rental property |
| 39-year | Straight line | Mid-month | Nonresidential real property |
Guides
- MACRS Depreciation for Rental Property: The 2026 Landlord Guide: How MACRS depreciation works for rental property in 2026: 27.5-year residential schedules, land vs building splits, cost segregation, and the mid-month convention, with worked examples.
- Section 179 vs Bonus Depreciation in 2026: Which to Use First: Section 179 vs bonus depreciation for 2026: the $2,560,000 cap, the phaseout threshold, why bonus can create a loss, and the order most tax planners apply them.
- 5-Year vs 7-Year Property: What Goes Where Under MACRS: Which assets are 5-year vs 7-year MACRS property? The IRS asset-class rules, common examples for offices and rentals, and what happens when you classify wrong.
- Depreciation Recapture Tax Explained: Sections 1245 and 1250: What depreciation recapture tax is, how Section 1245 and unrecaptured Section 1250 gain work, the 25% rate, and how a 1031 exchange defers recapture.
- How to Depreciate a Business Vehicle in 2026: Limits and Methods: Depreciating a business vehicle in 2026: luxury auto caps, the heavy SUV $32,000 Section 179 rule, bonus depreciation, and the 50% business-use requirement.
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Data current as of October 2026. Sources: IRS Publication 946, Revenue Procedure 2025-32, IRS Notice 2026-11. This tool gives rough estimates for planning only and is not tax, legal, or financial advice.