Part III. MACRS Depreciation — 2025 Inst 4562 (PDF)

The term “Modified Accelerated Cost Recovery System” (MACRS) includes the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Generally, MACRS is used to depreciate any tangible property placed in service after 1986. However, MACRS does not apply to films, videotapes, and sound recordings. For more details and exceptions, see Pub. 946.

Section A

Line 17 For tangible property placed in service in tax years beginning before 2025 and depreciated under MACRS (“MACRS asset”), enter the deductions for the current year. To figure the deductions, see the instructions for line 19, column (g).

Note: If you dispose of a portion of a MACRS asset and are required to (or elect to) take the basis of the asset into account, you must reduce the basis and depreciation reserve of the MACRS asset by the basis and depreciation reserve attributable to the disposed portion as of the first day of the tax year before you compute the depreciation deduction for the current year. To figure the depreciation deduction for the remaining MACRS asset and the disposed portion, see the instructions for line 19, column (g). For more information, see Regulations section 1.168(i)-8.

Line 18 To simplify the computation of MACRS depreciation, you can elect to group assets into one or more general asset accounts. The assets in each general asset account are depreciated as a single asset.

Each general asset account must include only assets that were placed in service during the same tax year and that have the same depreciation method, recovery period, and convention. However, an asset cannot be included in a general asset account if the asset is used both for personal purposes and business/investment purposes.

When an asset in an account is disposed of, the amount realized must generally be recognized as ordinary income. The unadjusted depreciable basis and depreciation reserve

of the general asset account are not affected as a result of a disposition.

Special rules apply to passenger automobiles, assets generating foreign source income, assets converted to personal use, certain asset dispositions, and like-kind exchanges or involuntary conversions of property in a general asset account. For more details, see Regulations section 1.168(i)-1 (as in effect for tax years beginning on or after January 1, 2014).

To make the election, check the box on line 18. You must make the election on your return filed no later than the due date (including extensions) for the tax year in which the assets included in the general asset account were placed in service. Once made, the election is irrevocable and applies to the tax year for which the election is made and all later tax years.

For more information on depreciating property in a general asset account, see Pub. 946.

Section B

Property acquired in a like-kind exchange or involuntary conversion. Generally, you must depreciate the carryover basis of property you acquire in a like-kind exchange or involuntary conversion during the current tax year over the remaining recovery period of the property exchanged or involuntarily converted. Use the same depreciation method and convention that was used for the exchanged or involuntarily converted property. Treat any excess basis as newly placed in service property. Figure depreciation separately for the carryover basis and the excess basis, if any.

These rules apply only to acquired property with the same or a shorter recovery period or the same or a more accelerated depreciation method than the property exchanged or involuntarily converted. For additional rules, see Regulations section 1.168(i)-6(c) and Pub. 946.

Election out. Instead of using the above rules, you can elect, for depreciation purposes, to treat the adjusted basis of the exchanged property as if it was disposed of at the time of the exchange or involuntary conversion. Generally, treat the carryover basis and excess basis, if any, for the acquired property as if placed in service on the date you acquired it. The depreciable basis of the new property is the adjusted basis of the exchanged or involuntarily converted property plus any additional amount paid for it. See Regulations section 1.168(i)-6(i).

To make the election, figure the depreciation deduction for the new property in Part III. For listed property, use Part V. Attach a statement indicating “Election made under section 1.168(i)-6(i)” for each property involved in the exchange or involuntary conversion. The election must be made separately by each person acquiring replacement property (for example, by the partnership, by the S corporation, or by the common parent of a consolidated group). The election must be made on your timely filed return (including extensions). Once made, the election cannot be revoked without IRS consent.

Caution: Generally, a like-kind exchange after December 31, 2017, is an exchange of real property.

Lines 19a Through 19j Use lines 19a through 19j only for assets placed in service during the tax year beginning in 2025 and depreciated under

Instructions for Form 4562 (2025) 9

GDS, except for automobiles and other listed property (which are reported in Part V).

Note: If you elect not to claim the special depreciation allowance for qualified production property, include the deduction for MACRS depreciation for this property in the total reported on line 19j and enter “See attachment” in the bottom margin of the form. On the attached statement identify the property as “QPP” and indicate the amount of MACRS depreciation claimed for this property. See Qualified Production Property , earlier, for details on which property qualifies as qualified production property.

Column (a)—Classification of property. Sort the property you acquired and placed in service during the tax year beginning in 2025 according to its classification (3-year property, 5-year property, etc.) as shown in column (a) of lines 19a through 19j. The classifications for some property are shown below. For property not shown, see Determining the classification, later.

Any property that does not have a class life and is not otherwise classified.

10-year property includes the following.

Vessels, barges, tugs, and similar water transportation equipment.
Initial clearing and grading land improvements for gas utility property.
Any single purpose agricultural or horticultural structure (see section 168(i)(13)).
Any tree or vine bearing fruits or nuts.
Any qualified smart electric meter property.
Any qualified smart electric grid system property. 15-year property includes the following.
Any municipal wastewater treatment plant.
Any telephone distribution plant and comparable equipment used for 2-way exchange of voice and data communications.
Any section 1250 property that is a retail motor fuels outlet (whether or not food or other convenience items are sold there).

3-year property includes the following.

A race horse that is more than 2 years old at the time it is placed in service.
Any horse (other than a race horse) that is more than 12 years old at the time it is placed in service.
Any qualified rent-to-own property (as defined in section 168(i)(14)). 5-year property includes the following.
Automobiles.
Light general purpose trucks.
Typewriters, calculators, copiers, and duplicating equipment.
Municipal sewers not classified as 25-year property.
Initial clearing and grading land improvements for electric utility transmission and distribution plants.
Certain electric transmission property specified in section 168(e)(3)(E)(v) placed in service after April 11, 2005, the original use of which begins with you after April 11, 2005, and is not under self-construction or subject to a binding contract in existence before April 12, 2005.
Qualified improvement property, as defined in section 168(e)(6), placed in service by you after December 31, 2017. 20-year property includes the following.
Farm buildings (other than single purpose agricultural or horticultural structures).
Any semi-conductor manufacturing equipment.
Any qualified technological equipment.
Any section 1245 property used in connection with research and experimentation.
Certain energy property specified in section 168(e)(3)(B) (vi).
Appliances, carpets, furniture, etc., used in a rental real estate activity.
Any new machinery or equipment (other than any grain bin, cotton ginning asset, fence, or other land improvement) used in a farming business and placed in service after 2017, in tax years ending after 2017. The original use of the property must begin with you after 2017.
Any qualified facility (as defined in section 45Y(b)(1)(A)), any qualified property (as defined in subsection (b)(2) of section 48E) which is a qualified investment (as defined in subsection (b)(1) of such section), or any energy storage technology (as defined in subsection (c)(2) of such section) and placed in service after 2025.

7-year property includes the following.

Office furniture and equipment.
Railroad track.
Any motorsports entertainment complex (as defined in section 168(i)(15)).
Any natural gas gathering line (as defined in section 168(i) (17)) placed in service after April 11, 2005, the original use of which begins with you after April 11, 2005, and is not under self-construction or subject to a binding contract in existence before April 12, 2005. Also, no AMT adjustment is required.

25-year property is water utility property, which is:

Property that is an integral part of the gathering, treatment, or commercial distribution of water that, without regard to this classification, would be 20-year property; and
Municipal sewers. This classification does not apply to property placed in service under a binding contract in effect at all times since June 9, 1996.

Residential rental property is a building in which 80% or more of the total rent is from dwelling units.

Nonresidential real property is any real property that is neither residential rental property nor property with a class life of less than 27.5 years.

50-year property includes any improvements necessary to construct or improve a roadbed or right-of-way for railroad track that qualifies as a railroad grading or tunnel bore under section 168(e)(4).

Determining the classification. If your depreciable property is not listed above, determine the classification as follows.

Find the property’s class life. See the Table of Class Lives and Recovery Periods in Pub. 946.
Use the following table to find the classification in column (b) that corresponds to the class life of the property in column (a).

Any used agricultural machinery and equipment placed in service after 2017, grain bins, cotton ginning assets, or fences used in a farming business (but no other land improvements).

10 Instructions for Form 4562 (2025)

(a) Class life (in years)

(b) Classification

(See Pub. 946.)

4 or less . . . . . . . . . . . . . . . . . . . . 3-year property More than 4 but less than 10 . . . . . . . . 5-year property 10 or more but less than 16 . . . . . . . . 7-year property 16 or more but less than 20 . . . . . . . . 10-year property 20 or more but less than 25 . . . . . . . . 15-year property 25 or more . . . . . . . . . . . . . . . . . . . 20-year property

Half-year convention. This convention applies to all property reported on lines 19a through 19h, unless the mid-quarter convention applies. It does not apply to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any tax year as placed in service (or disposed of) on the midpoint of that tax year. Enter “HY” in column (e).

Mid-quarter convention. If the total depreciable bases (before any special depreciation allowance) of MACRS property placed in service during the last 3 months of your tax year exceed 40% of the total depreciable bases of MACRS property placed in service during the entire tax year, the mid-quarter, instead of the half-year, convention generally applies.

Column (b)—Month and year placed in service. For lines19i and 19j, enter the month and year you placed the property in service. If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date.

Column (c)—Basis for depreciation (business/invest- ment use only). To find the basis for depreciation, multiply the cost or other basis of the property by the percentage of business/investment use. From that result, subtract any credits and deductions allocable to the property. The following are examples of some credits and deductions that reduce the basis for depreciation.

Section 179 expense deduction.
Deduction under section 179D for certain energy efficient commercial building property.

In determining whether the mid-quarter convention applies, do not take into account the following.

Property that is being depreciated under a method other than MACRS.

The mid-quarter convention treats all property placed in service (or disposed of) during any quarter as placed in service (or disposed of) on the midpoint of that quarter. However, no depreciation is allowed under this convention for property that is placed in service and disposed of within the same tax year. Enter “MQ” in column (e).

Mid-month convention. This convention applies only to residential rental property (line 19i), nonresidential real property (line 19j), and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month. Enter “MM” in column (e).

Any residential rental property, nonresidential real property, or railroad gradings and tunnel bores.
Property that is placed in service and disposed of within the same tax year.
Deduction for removal of barriers to the disabled and the elderly.
Disabled access credit.
Enhanced oil recovery credit.
Credit for alternative fuel vehicle refueling property.
Credit for employer-provided childcare facilities and services.
Any special depreciation allowance included on line 14.
Any basis adjustment for investment credit property. See section 50(c).
Any basis adjustment for advanced manufacturing investment credit property. See section 48D(d)(5).

For additional credits and deductions that affect the depreciable basis, see section 1016 and Pub. 946.

Column (d)—Recovery period. Determine the recovery period from the following table. See Pub. 946 for more information on the recovery period for MACRS property.

Recovery Period for Most Property

Classification Recovery period 3-year property . . . . . . . . . . . . . . . . . . . . 3 yrs. 5-year property . . . . . . . . . . . . . . . . . . . . 5 yrs. 7-year property . . . . . . . . . . . . . . . . . . . . 7 yrs. 10-year property . . . . . . . . . . . . . . . . . . . 10 yrs. 15-year property . . . . . . . . . . . . . . . . . . . 15 yrs. 20-year property . . . . . . . . . . . . . . . . . . . 20 yrs. 25-year property . . . . . . . . . . . . . . . . . . . 25 yrs. Residential rental property . . . . . . . . . . . . . 27.5 yrs. Nonresidential real property . . . . . . . . . . . . 39 yrs. Railroad gradings and tunnel bores . . . . . . . 50 yrs.

Column (e)—Convention. The applicable convention determines the portion of the tax year for which depreciation is allowable during a year property is either placed in service or disposed of. There are three types of conventions. To select the correct convention, you must know the type of property and when you placed the property in service.

Column (f)—Method. Applicable depreciation methods are prescribed for each classification of property as follows. However, you can make an irrevocable election to use the straight line method for all property within a classification that is placed in service during the tax year. Enter “200 DB” for 200% declining balance, “150 DB” for 150% declining balance, or “S/L” for straight line.

3-, 5-, 7-, and 10-year property. Generally, the applicable method is the 200% declining balance method, switching to the straight line method in the first tax year that the straight line rate exceeds the declining balance rate.

Note: The straight line method is the only applicable method for trees and vines bearing fruits or nuts. The 150% declining balance method is the only applicable method for any qualified smart electric meter or any qualified smart electric grid system property placed in service after October 3, 2008.

For 3-, 5-, 7-, or 10-year property eligible for the 200% declining balance method, you can make an irrevocable election to use the 150% declining balance method, switching to the straight line method in the first tax year that the straight line rate exceeds the declining balance rate. The election applies to all property within the classification for which it is made and that was placed in service during the tax year. You will not have an AMT adjustment for any property included under this election.

For 3-, 5-, 7-, or 10-year property used in a farming business and placed in service after 2017, in tax years ending after 2017, the 150% declining balance method is no longer required. However, the 150% declining balance

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method will continue to apply to any 15- or 20-year property used in a farming business to which the straight line method does not apply or to property for which you elect the use of the 150% declining balance method.

15- and 20-year property and property used in a farming business. The applicable method is the 150% declining balance method, switching to the straight line method in the first tax year that the straight line rate exceeds the declining balance rate. For 3-, 5-, 7-, and 10-year property used in a farming business and placed in service after 2017, see 3-, 5-, 7-, or 10-year property above.
Water utility property, residential rental property, nonresidential real property, or any railroad grading or tunnel bore. The only applicable method is the straight line method.

Column (g)—Depreciation deduction. To figure the depreciation deduction, you may use optional Tables A through E, which begin later. Multiply column (c) by the applicable rate from the appropriate table. See Pub. 946 for complete tables. If you disposed of the property during the current tax year, multiply the result by the applicable decimal amount from the tables in Step 3, later. Or, you may compute the deduction yourself by completing the following steps.

Step 1. Determine the depreciation rate as follows.

If you are using the 200% or 150% declining balance method in column (f), divide the declining balance rate (use 2.00 for 200 DB or 1.50 for 150 DB) by the number of years in the recovery period in column (d). For example, for property depreciated using the 200 DB method over a recovery period of 5 years, divide 2.00 by 5 for a rate of 40%. You must switch to the straight line rate in the first year that the straight line rate exceeds the declining balance rate.
If you are using the straight line method, divide 1.00 by the remaining number of years in the recovery period as of the beginning of the tax year (but not less than 1). For example, if there are 6 ¹ /2 years remaining in the recovery period as of the beginning of the year, divide 1.00 by 6.5 for a rate of 15.38%.

Step 2. Multiply the percentage rate determined in Step 1 by the property’s unrecovered basis (basis for depreciation (as defined in column (c)) reduced by all prior years’ depreciation.

Step 3. For property placed in service or disposed of during the current tax year, multiply the result from Step 2 by the applicable decimal amount from the tables below (based on the convention shown in column (e)).

Half-year (HY) convention . . . . . . . . . . . . . . . . . . . . . 0.5

Mid-quarter (MQ) convention

Any nonresidential real property, residential rental property, or qualified improvement property held by an electing real property trade or business (as defined in section 163(j)(7) (B)).
Any property that has a recovery period of 10 years or more under section 168(c) that is held by an electing farming business (as defined in section 163(j)(7)(C)).

Instead of depreciating property under GDS (line 19), you can make an irrevocable election for any classification of property for any tax year to use ADS. For residential rental and nonresidential real property, you can make this election separately for each property. You make this election by completing line 20 of Form 4562.

Column (a)—Classification of property. Use the following rules to determine the classification of the property under ADS.

Under ADS, the depreciation deduction for most property is based on the property’s class life. See section 168(g)(3) for special rules for determining the class life for certain property. See Pub. 946 for information on recovery periods for ADS and the Table of Class Lives and Recovery Periods.

Mid-month (MM) convention Placed in service (or disposed of) during the:

Placed in service

Disposed

(or disposed of) during the: in service of

1st month . . . . . . . . . . . 0.9583 0.0417 2nd month . . . . . . . . . . . 0.8750 0.1250 3rd month . . . . . . . . . . . 0.7917 0.2083 4th month . . . . . . . . . . . 0.7083 0.2917 5th month . . . . . . . . . . . 0.6250 0.3750 6th month . . . . . . . . . . . 0.5417 0.4583 7th month . . . . . . . . . . . 0.4583 0.5417 8th month . . . . . . . . . . . 0.3750 0.6250 9th month . . . . . . . . . . . 0.2917 0.7083 10th month . . . . . . . . . . . 0.2083 0.7917 11th month . . . . . . . . . . . 0.1250 0.8750 12th month . . . . . . . . . . . 0.0417 0.9583

Short tax years. See Pub. 946 for rules on how to compute the depreciation deduction for property placed in service in a short tax year.

Section C

Lines 20a Through 20e Complete lines 20a through 20e for assets, other than automobiles and other listed property, placed in service only during the tax year beginning in 2025 and depreciated under ADS. Report on line 17 MACRS depreciation on assets placed in service in prior years.

Under ADS, use the applicable depreciation method, the applicable recovery period, and the applicable convention to compute depreciation.

The following types of property must be depreciated under ADS.

Tangible property used predominantly outside the United States.
Tax-exempt use property.
Tax-exempt bond financed property.
Imported property covered by an executive order of the President of the United States.
Property used predominantly in a farming business and placed in service during any tax year in which you made an election under section 263A(d)(3) to not have the uniform capitalization rules of section 263A apply.

Placed in service (or disposed of) during the:

Placed in service

Disposed

(or disposed of) during the: in service of

1st quarter . . . . . . . . . . 0.875 0.125 2nd quarter . . . . . . . . . 0.625 0.375 3rd quarter . . . . . . . . . . 0.375 0.625 4th quarter . . . . . . . . . . 0.125 0.875

12 Instructions for Form 4562 (2025)

Use line 20a for all property depreciated under ADS, except property that does not have a class life, residential rental and nonresidential real property, water utility property, and railroad gradings and tunnel bores. Use line 20b for property that does not have a class life. Use line 20c for residential rental property. Use line 20d for nonresidential real property.

Residential rental property. The ADS recovery period for residential rental property placed in service after 2017 is 30 years. The ADS recovery period for residential rental property placed in service before January 1, 2018, is 30 years if the property is held by an electing real property trade or business (as defined in section 163(j)(7)(B)) and section 168(g)(1)(A), (B), (C), (D), or (E) did not apply to the property before January 1, 2018. Report depreciation for these assets on line 20c. For more information, see Pub. 946.

Water utility property and railroad gradings and tunnel bores. These assets are 50-year property under ADS. Use line 20e for reporting water utility property and railroad grading and tunnel bores. For more information, see Pub. 946.

Column (b)—Month and year placed in service. For residential rental property and 40-year property, enter the month and year placed in service or converted to use in a trade or business or for the production of income.

Column (c)—Basis for depreciation (business/invest- ment use only). See the instructions for line 19, column (c).

Column (d)—Recovery period. On line 20a, enter the property’s class life.

Column (e)—Convention. Under ADS, the applicable conventions are the same as those used under GDS. See the instructions for line 19, column (e).

Column (g)—Depreciation deduction. Figure the depreciation deduction in the same manner as under GDS, except use the straight line method over the ADS recovery period and use the applicable convention.

MACRS recapture. If you later dispose of property you depreciated using MACRS, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the depreciation previously allowed or allowable for the property. Depreciation, for this purpose, includes any of the following amounts taken during the 2025 tax year.

Any section 179 expense deduction claimed on the property.
Any special depreciation allowance available for the property (unless you elected not to claim it).
Any deduction under section 179B for capital costs incurred in complying with Environmental Protection Agency sulfur regulations.

There is no recapture for residential rental and nonresidential real property, unless that property is qualified property for which you claimed a special depreciation allowance (discussed earlier). For more information on depreciation recapture, see Pub. 946.