US Depreciation Calculator

How depreciation actually works

Say you buy a $30,000 delivery van for the business. You cannot deduct $30,000 this year and be done. The tax code treats the van as something that earns money for several years, so the cost is spread across those years. Each year’s slice is your depreciation deduction.

Three things decide the size of the slice: how long the asset’s recovery period is, which method applies, and which convention decides how much of the first year you get. The calculator above handles all three, but it is worth knowing what each one is doing.

Step 1: the recovery period, which most people have to look up

The recovery period is not your guess at how long the asset lasts. It is set by the IRS by asset type. A computer is 5 years even if you keep it for 9. Office furniture is 7 years. A rental house is 27.5 years. The table in the calculator lists the common ones, and you can type your own if your asset is not there.

Step 2: the method, which front-loads the deduction

Most business equipment uses 200% declining balance, which deducts roughly double the straight line amount early on, then switches to straight line once that gives more. Land improvements and 20-year property use 150% declining balance. Buildings always use straight line, spread evenly.

Step 3: the convention, which is where people slip

You almost never get a full first year. Under the half-year convention everything you buy is treated as if you bought it exactly at mid-year, so year one gets half a year of depreciation no matter whether you bought in January or December. That is why a 5-year asset actually takes six tax years to write off.

The trap is the mid-quarter convention. If more than 40% of your non-real property lands in the last three months of the year, the half-year rule is replaced for everything you placed in service that year, not just the December purchases. Each asset is then rated by the quarter it arrived in: an asset bought in the first quarter gets a bigger first-year rate than half-year would have given, and one bought in the fourth quarter gets a much smaller one. Because the late purchase is usually the large one, the net effect is normally a smaller deduction. The calculator applies the right convention automatically, and you can force it to compare.

Worked examples in plain language

Example 1: a $3,000 laptop, bought in March

Computers are 5-year property. With 100% bonus depreciation you deduct the whole $3,000 in year one and there is nothing left to depreciate. If you elect out of bonus, the half-year convention gives you 20% in year one, so $600, then $960 in year two, and so on across six tax years. Same asset, very different first-year deduction. Bonus is usually the better answer if you have profit to absorb it, and the worse answer if the deduction is worth more to you in later, higher-income years.

Example 2: a $60,000 truck for the business

A heavy truck over 6,000 lb is 5-year property and escapes the passenger automobile caps, so section 179 and bonus can wipe out most of the cost in year one. A car, on the other hand, runs into the section 280F limits: for a car placed in service in 2026 and eligible for bonus, the first-year deduction is capped at $20,300 no matter how expensive the car is. Tick the passenger auto box in the calculator and watch the first-year number stop dead at the cap.

Example 3: a $300,000 rental house, bought in June

First split the price between land and building, because land is never depreciated. Say the building is $240,000. Residential rental property is 27.5 years, straight line, mid-month. Bought in June, year one gives 1.970% of the basis, which is $4,728. Every full year after that is 3.636%, or $8,726. Section 179 and bonus do not apply to the building itself, although appliances and carpets inside it are 5-year property that do qualify.

Example 4: the mid-quarter trap

You buy $20,000 of 5-year equipment in February and $40,000 more in November. That November purchase is 67% of the year’s total, above the 40% threshold, so mid-quarter applies to both.

The February equipment actually does better under mid-quarter, 35% instead of 20%. The November equipment does far worse, 5% instead of 20%, and because it is the larger purchase it drags the total down: $9,000 instead of $12,000. Moving that November order into September would have kept both purchases under the half-year rule and been worth $3,000 in the first year.

Section 179 and bonus depreciation, side by side

Both let you deduct far more up front than the normal schedule. They stack in a fixed order: section 179 first, then bonus on whatever basis is left, then the regular MACRS table on what remains after that.

The figures above are from Revenue Procedure 2025-32 for tax years beginning in 2026. The 100% bonus rate comes from the One Big Beautiful Bill Act, which reinstated it for qualified property acquired and placed in service after 19 January 2025.

Where this shows up on Form 4562

The Form 4562 panel in the calculator maps each amount to its line, so you can see how the pieces travel onto the return. Section 179 is Part I and lands on line 12. Bonus depreciation is Part II, line 14. The regular MACRS deduction for assets placed in service this year is Part III, Section B, line 19, on the row for your property class, with the recovery period, convention and method spelled out in the columns. Everything totals on line 22, which is what carries to your Schedule C, Schedule E or corporate return. Listed property such as cars is reported in Part V instead, and its total feeds back into line 21.

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