The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions.
To be sure you can use MACRS to figure depreciation for your property, see Which Method Can You Use To Depreciate Your Property in
This chapter explains how to determine which MACRS depreciation system applies to your property. It also discusses other information you need to know before you can figure depreciation under MACRS. This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. Finally, it explains when and how to recapture MACRS depreciation.taxmap/pubs/p946-019.htm#TXMP31907c98
You may want to see:
Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car
Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers)
Form (and Instructions) 2106 : Employee Business Expenses 2106-EZ : Unreimbursed Employee Business Expenses 4562 : Depreciation and Amortization
See chapter 6 for information about getting publications and forms.taxmap/pubs/p946-019.htm#en_us_publink1000107509
Words you may need to know (see Glossary)
- Listed property
- Nonresidential real property
- Placed in service
- Property class
- Recovery period
- Residential rental property
- Tangible property
- Tax exempt
Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS.
If you placed your property in service in 2009, complete Part III of Form 4562 to report depreciation using MACRS. Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. If you placed your property in service before 2009 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III.taxmap/pubs/p946-019.htm#en_us_publink1000107510
You must use ADS for the following property.
- Listed property used 50% or less in a qualified business use. See chapter 5 for information on listed property.
- Any tangible property used predominantly outside the United States during the year.
- Any tax-exempt use property.
- Any tax-exempt bond-financed property.
- All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect.
- Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts.
If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property.
Although your property may qualify for GDS, you can elect to use ADS. The election generally must cover all property in the same property class that you placed in service during the year. However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Once you make this election, you can never revoke it.
You make the election by completing line 20 in Part III of Form 4562.