The formulas
- 200% declining balance for 3, 5, 7, 10 year; 150% for 15, 20 year; switch to straight line when it is equal or greater
- First-year fraction: half-year 0.5; mid-quarter Q1 0.875, Q2 0.625, Q3 0.375, Q4 0.125
- Mid-quarter applies when more than 40% of the year's bases are placed in service in the last three months
How it works
Tax year: Any year placed in service (GDS).
MACRS general depreciation system uses the 200 percent declining balance method for 3, 5, 7 and 10 year property and 150 percent for 15 and 20 year property, switching to straight line when that gives an equal or greater deduction. The half-year convention applies unless more than 40 percent of the year's depreciable bases were placed in service in the last three months, in which case the mid-quarter convention applies.
The tool computes each year's percentage from that formula, so the first-year rate for 5-year half-year property is 20 percent and for 7-year it is 14.29 percent. Publication 946 prints the same rates rounded to two decimals. Real property under the mid-month convention is not covered.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What is the 40 percent test?
If the depreciable bases placed in service in the last three months of the year are more than 40 percent of the year's total, use the mid-quarter convention for all that year's property.
Are land and real property included in the test?
The test uses the depreciable bases of MACRS property placed in service in the year, so enter the bases after any section 179 deduction.
When does straight line replace declining balance?
In the first year it gives an equal or greater deduction.
Sources
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.