MACRS Depreciation

Most business and investment property placed in service after 1986 is depreciated using MACRS.

This section 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,

• Applicable recovery period,

• Convention,

• Placed-in-service date,

• Basis for depreciation, and

• Depreciation method.

Depreciation Systems

MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS.

Excluded Property

You can’t use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2025 if it had been previously placed in service before 1987, when MACRS became effective.

In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. However, the property isn’t excluded if your 2025 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. For more information, see What Method Can You Use To Depreciate Your Property? in chapter 1 of Pub. 946.

12 Chapter 2 Depreciation of Rental Property Publication 527 (2025)

Electing ADS

If you choose, you can use the ADS method for most property. Under ADS, you use the straight line method of depreciation.

The election of ADS for one item in a class of property generally applies to all property in that class placed in service during the tax year of the election. However, the election applies on a property-by-property basis for residential rental property and nonresidential real property.

If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. Once you make this election, you can never revoke it.

For property placed in service during 2025, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c.

Property Classes Under GDS

Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. The property class generally determines the depreciation method, recovery period, and convention.

The property classes under GDS are:

• 3-year property,

• 5-year property,

• 7-year property,

• 10-year property,

• 15-year property,

• 20-year property,

• Nonresidential real property, and

• Residential rental property.

Under MACRS, property that you placed in service during 2025 in your rental activities generally falls into one of the following classes.

• 5-year property. This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc.), automobiles, and light trucks.

This class also includes appliances, carpeting, and furniture used in a residential rental real estate activity.

Depreciation is limited on automobiles and other property used for transportation and property of a type generally used for entertainment, recreation, or amusement. See chapter 5 of Pub. 946.

• 7-year property. This class includes office furniture and equipment (desks, file cabinets, and similar items). This class also includes any property that doesn’t have a class life and that hasn’t been designated by law as being in any other class.

• 15-year property. This class includes roads, fences, and shrubbery (if depreciable).

• Residential rental property. This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. It doesn’t include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in.

The other property classes generally don’t apply