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Publication 946

Chapter 4
Figuring Depreciation Under MACRS(p29)


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 What Method Can You Use To Depreciate Your Property in chapter 1.
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.


Useful items

You may want to see:

 225  Farmer's Tax Guide
 463  Travel, Entertainment, Gift, and Car

 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.

Which Depreciation System (GDS or ADS) Applies?(p30)


Words you may need to know (see Glossary)

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 2017, 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 2017 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III.

Required use of ADS.(p30)

You must use ADS for the following property.
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.

Electing ADS.(p30)

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 Form 4562, Part III, line 20.