! to property used in rental activities. These classes

CAUTION aren’t discussed in this publication. See Pub. 946

for more information.

Recovery Periods Under GDS

The recovery period of property is the number of years over which you recover its cost or other basis. The recovery periods are generally longer under ADS than GDS.

The recovery period of property depends on its property class. Under GDS, the recovery period of an asset is generally the same as its property class.

Class lives and recovery periods for most assets are listed in Appendix B of Pub. 946. See Table 2-1 for recovery periods of property commonly used in residential rental activities.

Additions or improvements to property. Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes.

The property class and recovery period of the addition or improvement are the ones that would apply to the original property if you had placed it in service at the same time as the addition or improvement.

The recovery period for an addition or improvement to property begins on the later of:

• The date the addition or improvement is placed in service, or

• The date the property to which the addition or improvement was made is placed in service.

Example. You own a residential rental house that you have been renting since 1999 and depreciating under MACRS. You built an addition onto the house and placed it in service in 2025. You must begin depreciating the addition in 2025 using MACRS. Under GDS, the addition is depreciated as residential rental property over 27.5 years.

Conventions

A convention is a method established under MACRS to set the beginning and end of the recovery period. The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property.

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Mid-month convention. A mid-month convention is used for all residential rental property and nonresidential real property. Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month.

Mid-quarter convention. A mid-quarter convention must be used if the mid-month convention doesn’t apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year.

Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter.

Example. During the tax year, you purchased the following items to use in your rental property. You elect not to

claim the special depreciation allowance discussed earlier.

• A dishwasher for $400 that you placed in service in January.

• Used furniture for $100 that you placed in service in September.

• A refrigerator for $800 that you placed in service in October.

You use the calendar year as your tax year. The total basis of all property placed in service that year is $1,300. The $800 basis of the refrigerator placed in service during the last 3 months of your tax year exceeds $520 (40% × $1,300). You must use the mid-quarter convention instead of the half-year convention for all three items.

Half-year convention. The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. Under this convention, you treat all property placed in service, or disposed of, during a tax

Table 2-1. MACRS Recovery Periods for Property Used in Rental Activities

Type of Property

General Depreciation System

Keep for Your Records

MACRS Recovery Period

Alternative Depreciation System

Computers and their peripheral equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years 5 years Office machinery, such as:

• Typewriters

• Calculators

• Copiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years 6 years Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years 5 years Light trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years 5 years Appliances, such as:

• Stoves

• Refrigerators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years 9 years Carpets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years 9 years Furniture used in rental property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 years 9 years

Office furniture and equipment, such as:

• Desks

• Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 years 10 years Any property that doesn’t have a class life and that hasn’t been designated by law as being in any other class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 years 12 years

Roads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 years 20 years Shrubbery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 years 20 years Fences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 years 20 years

Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.5 years 30 years ¹

Additions and improvements, such as a new roof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The same recovery period as that of the property

to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement.

1 40 years for property placed in service before January 1, 2018. However, 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.

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

year as placed in service, or disposed of, at the midpoint of that tax year.

If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. You deduct a full year of depreciation for any other year during the recovery period.

Figuring Your Depreciation Deduction

You can figure your MACRS depreciation deduction in one of two ways. The deduction is substantially the same both ways. You can figure the deduction using either:

• The depreciation method and convention that apply over the recovery period of the property, or

• The percentage from the MACRS percentage tables.

In this publication, we will use the percentage tables. For instructions on how to compute the deduction, see chapter 4 of Pub. 946.

Residential rental property. You must use the straight line method and a mid-month convention for residential rental property. In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use. Use the mid-month convention (explained under Conventions, earlier).

5-, 7-, or 15-year property. For property in the 5- or 7-year class, use the 200% declining balance (DB) method and a half-year convention. However, in limited cases, you must use the mid-quarter convention, if it applies. For property in the 15-year class, use the 150% DB method and a half-year convention, unless the mid-quarter convention applies.

You can also choose to use the 150% DB method for property in the 5- or 7-year class. The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. You make this election on Form 4562. In Part III, column (f), enter “150 DB.” Once you make this election, you can’t change to another method.

If you use either the 200% or 150% DB method, figure your deduction using the straight line method in the first tax year that the use of the straight line method gives you an equal or larger deduction than the use of the 200% or 150% DB method. You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. You elect the straight line method on Form 4562. In Part III, column (f), enter “S/L.” Once you make this election, you can’t change to another method.

percentages for the first few years or until the change to the straight line method is made. See Appendix A of Pub. 946 for complete tables. The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from using the DB method to the straight line method in the first tax year that the use of the straight line method gives you an equal or greater deduction than the use of the DB method.

If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% DB method for 5- or 7-year property, use the tables in Appendix A of Pub. 946.

How to use the percentage tables. You must apply the table rates to your property’s unadjusted basis (defined later) each year of the recovery period.

Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than:

1. Depreciation allowed or allowable, or

2. An addition or improvement that is depreciated as a separate item of property.

If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. For the year of the adjustment and for the remaining recovery period, figure depreciation using the property’s adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduc- tion . See Figuring the Deduction Without Using the Tables in chapter 4 of Pub. 946.

Unadjusted basis. This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years.

However, you do reduce your original basis by other amounts claimed on the property, including:

• Any amortization,

• Any section 179 deduction, and

• Any special depreciation allowance.

For more information, see chapter 4 of Pub. 946.

MACRS Percentage Tables

You can use the percentages in Table 2-2 to compute annual depreciation under MACRS. The tables show the

Publication 527 (2025) Chapter 2 Depreciation of Rental Property 15

Tables 2-2a, 2-2b, and 2-2c. The percentages in these tables take into account the half-year and mid-quarter conventions. Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). If you must use the mid-quarter convention, use the column that corre-

Table 2-2. Optional MACRS GDS Percentage Tables

a. MACRS 5-Year Property (200% DB)

sponds to the calendar year quarter in which you placed the property in service.

Example 1. You purchased a stove and refrigerator and placed them in service in June. Your basis in the stove is $600 and your basis in the refrigerator is $1,000. Both are 5-year property. Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. For that year, your depreciation deduction is $120

b. MACRS 7-Year Property (200% DB)

c. MACRS 15-Year Property (150% DB)

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

($600 × 20% (0.20)) for the stove and $200 ($1,000 × 20% (0.20)) for the refrigerator. For Year 2, the depreciation percentage is 32%. That year’s depreciation deduction will be $192 ($600 × 32% (0.32)) for the stove and $320 ($1,000 × 32% (0.32)) for the refrigerator.

Example 2. Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. Because the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × 40% (0.40) = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator.

Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. Your depreciation deduction for the refrigerator is $50 ($1,000 x 5% (0.05)). Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. For that year, your depreciation deduction for the stove is $150 ($600 x 25% (0.25)).

Table 2-2d. Use this table when you are using the GDS 27.5-year option for residential rental property. Find the row for the month that you placed the property in service. Use the percentages listed for that month to figure your depreciation deduction. The mid-month convention is taken into account in the percentages shown in the table. Continue to use the same row (month) under the column for the appropriate year.

Example. You purchased a single family rental house for $185,000 and placed it in service on February 8. The sales contract showed that the building cost $160,000 and the land cost $25,000. Your basis for depreciation is its original cost, $160,000. This is the first year of service for your residential rental property and you decide to use GDS, which has a recovery period of 27.5 years. Using Table 2-2d, you find that the depreciation percentage for property placed in service in February of Year 1 is 3.182%. That year’s depreciation deduction is $5,091 ($160,000 x 3.182% (0.03182)).

Figuring MACRS Depreciation Under ADS

Table 2-1 shows the ADS recovery periods for property used in rental activities.

See Appendix B of Pub. 946 for other property. If your property isn’t listed in Appendix B, it is considered to have no class life. Under ADS, personal property with no class life is depreciated using a recovery period of 12 years.

Use the mid-month convention for residential rental property and nonresidential real property. For all other property, use the half-year or mid-quarter convention, as appropriate.

See Pub. 946 for ADS depreciation tables.