The short answer
MACRS, the Modified Accelerated Cost Recovery System, is the depreciation system in section 168 that you must use for most business and investment property placed in service after 1986. It has two branches: the General Depreciation System, which sets the usual recovery periods, and the Alternative Depreciation System, which uses straight-line over longer periods. For real estate, MACRS splits one purchase into land, which is not depreciated, and components with recovery periods from 5 to 39 years.
At a glance
| Buildings | 27.5 years residential, 39 years nonresidential, straight-line, mid-month |
|---|---|
| Land improvements | 15 years, 150% declining balance, generally the half-year convention |
| ADS periods | 30 years residential, 40 nonresidential, 20 for land improvements |
| Bonus | 100% for qualified property with a recovery period of 20 years or less acquired after January 19, 2025 |
MACRS comes from section 168 and has two systems, GDS and ADS
IRS Publication 946 states that MACRS is used to recover the basis of most business and investment property placed in service after 1986 and consists of two systems, GDS and ADS. Property placed in service before 1987 stays on the older ACRS rules.
Under GDS, section 168(c) assigns 27.5 years to residential rental property and 39 years to nonresidential real property, both straight-line with the mid-month convention. Publication 946 lists 15-year property as including improvements made directly to land, such as shrubbery, fences, roads and sidewalks, and qualified improvement property; section 168(b)(2) applies the 150% declining balance method to 15- and 20-year property. Appliances, furniture and similar personal property in a rental generally fall in shorter classes.
Qualified improvement property is a separate 15-year category worth knowing for commercial owners. Section 168(e)(6) defines it as an improvement to an interior portion of a nonresidential building made after the building was first placed in service, excluding enlargements, elevators and escalators, and the internal structural framework, and section 168(b)(3) puts it on the straight-line method.
ADS under section 168(g) uses straight-line over longer periods: 30 years for residential rental property, 40 years for nonresidential real property, and the class life for other property, which Publication 946 shows as 20 years for land improvements in asset class 00.3.
Worked example: one purchase, several MACRS classes
Hypothetical: you buy a small retail building for $2,000,000. Your CPA allocates $400,000 to land, $1,450,000 to the building, $100,000 to paving and landscaping, and $50,000 to personal property. Land gets no depreciation. The building runs 39 years straight-line, about $37,180 a full year. The paving is 15-year property, and the personal property sits in a shorter class.
If acquired after January 19, 2025, the paving and personal property are eligible for 100% bonus depreciation, because section 168(k) covers property with a recovery period of 20 years or less. The building is not. Run your own numbers with your CPA.
Where it bites: required ADS, exchanged basis, and recapture
Some owners must use ADS. Publication 946 lists real property and qualified improvement property held by an electing real property trade or business under section 163(j)(7)(B), and property you must depreciate under ADS cannot take the special depreciation allowance.
In an exchange, Publication 946 says the carryover basis keeps the relinquished property's remaining recovery period and method, while excess basis is treated as newly placed in service; see depreciating replacement property. Faster classes produce ordinary-income recapture on sale, covered under section 1245 recapture and cost segregation before selling.
The building itself follows straight-line depreciation, and the 15-year class is explained under land improvements.
Related questions
What is the difference between GDS and ADS?
GDS uses the standard recovery periods and, for shorter classes, declining balance methods. ADS under section 168(g) uses straight-line over longer periods and is required in some cases, such as for an electing real property trade or business.
Is land depreciable under MACRS?
No. Publication 946 says land does not wear out, and its cost generally includes clearing, grading, planting and landscaping, though landscaping closely tied to a building can be depreciated.
Can I elect out of bonus depreciation?
Yes, by class of property for a tax year under section 168(k); for the first tax year ending after January 19, 2025, you can also elect 40% instead of 100%. See 2026 bonus depreciation rules.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.