IRS Depreciation Tables: How to Read Them and Use Them for 2025–2026

If you own business assets or income producing property, the IRS depreciation tables determine exactly how much of that asset's cost you can write off each year on your federal tax returns. Get the table wrong, and you either leave money on the table or risk an audit adjustment. This guide walks you through every table, method, and convention you need for tax years 2025 and 2026-plus the recent legislative changes that restored 100% bonus depreciation.

Quick Answer: How to Use IRS Depreciation Tables Right Now

The IRS depreciation table allows businesses to write off the cost of tangible assets gradually over years. These tables live in IRS Publication 946, Appendix A, and they tell you the exact depreciation percentage to apply to an asset's cost basis for each year of its recovery period under the Modified Accelerated Cost Recovery system (MACRS).

Here is a 4-step quick-use guide:

1. Identify property type. Determine whether you have personal property (like office furniture, computers, or machinery) or real property (like a rental building or commercial warehouse).

2. Find the recovery period. Use Publication 946, Appendix B to match your asset to the correct property class-3, 5, 7, 10, 15, 20, 27.5, or 39 years.

3. Choose the system and method. For most business property, you will use the General Depreciation System (GDS) with the 200% declining balance method. If the Alternative Depreciation System is required, you will use straight line depreciation over a longer life.

4. Look up the percentage and multiply. Find the correct table in Appendix A, locate the percentage for your recovery year, and multiply it by your depreciable basis to calculate depreciation for that tax year.

For 3- through 20-year tangible personal property using GDS and the half year convention, you will typically reference Table A-1. For residential rental property (27.5 years) and nonresidential real property (39 years), you use separate real property tables that apply the mid month convention, where the first-year percentage depends on the month the property was placed in service.

Segtax uses these same IRS tables under the hood to build audit-ready depreciation and cost segregation schedules for tax professionals and real estate investors-automating the table lookups so you can focus on strategy rather than manual calculations.

What Are IRS Depreciation Tables?

Depreciation tables are official IRS charts that list annual depreciation percentages organized by property class, recovery period, depreciation method, and convention. Instead of forcing every taxpayer to run declining balance or straight line calculations by hand, the IRS publishes precomputed percentages that sum to 100% over the full specified recovery period.

The primary source for current MACRS depreciation tables is IRS Publication 946, "How to Depreciate Property," Appendix A. For historical reference, older publications like Pub. 534 cover pre-1987 property under the accelerated cost recovery system that preceded MACRS.

These tables reflect the Modified Accelerated Cost Recovery system, the primary U.S. tax depreciation system for depreciable property placed in service after 1986. MACRS replaced the earlier system through the Tax Reform Act of 1986 to standardize and accelerate how businesses depreciate property.

Key points to remember:

• The IRS provides depreciation tables in Publication 946, and that is the authoritative source for current rules.

• MACRS depreciation tables list annual percentages for property classes ranging from 3 to 39 years.

• Tax preparation software and platforms like Segtax embed these tables so users rarely need to look up percentages manually, but understanding the table structure helps catch errors and guides strategic planning.

Overview of MACRS: Systems, Methods, and Conventions

MACRS is built from three building blocks that together determine which IRS depreciation table you use:

Depreciation system. MACRS includes two systems: GDS and ADS. The General Depreciation System is the default. It uses shorter recovery periods and accelerated depreciation methods, which front-load deductions. The Alternative Depreciation System requires straight line depreciation over longer recovery periods and is mandatory for tax exempt use property, certain property used outside the U.S., property financed with tax exempt bonds, and when specifically mandated by the Internal Revenue Code. ADS can also be elected for planning purposes.

Depreciation method. Under GDS, the available depreciation methods include the 200% declining balance method, the 150% declining balance method, and the straight line method. ADS uses only straight line depreciation. The IRS depreciation tables incorporate the 200% and 150% declining balance methods and straight line methods, with the switch to straight line already built into the table percentages when it becomes more favorable.

Depreciation convention. Conventions determine how much depreciation you can claim in the first and last years. The IRS applies different conventions such as half-year and mid-quarter to determine how much depreciation can be claimed initially:

• The half year convention applies to most personal property under MACRS, treating assets as placed in service at the midpoint of the year.

• The mid quarter convention is triggered when more than 40% of certain property is placed in service during the last three months of the tax year.

• The mid month convention is used for real property depreciation-both residential rental property and nonresidential real property.

Each combination of system, method, and convention corresponds to a specific IRS table. For example, Table A-1 covers GDS with 200% declining balance and the half year convention. Tables A-2 through A-5 handle mid quarter scenarios. Tables A-6 and A-7a cover residential and nonresidential real property.

Property Classes and Recovery Periods in the Depreciation Tables

Every depreciable asset must be assigned to a MACRS property class, which determines its recovery period in years. The IRS assigns specific recovery periods for different asset classes in depreciation tables, and correct classification is the single most important step in the process.

Common GDS recovery periods include:

• 3-year property: Certain racehorses, specialized manufacturing tools, and tractor units for over-the-road use.

• 5-year property: Computers, vehicles, appliances, and certain equipment used in research.

• 7-year property: Office furniture and fixtures, most general equipment items, and agricultural machinery.

• 10-year, 15-year, and 20-year property: Land improvements (sidewalks, fences, parking lots) typically fall into the 15-year class. Certain utility assets and water transportation equipment use 10- or 20-year periods.

• 27.5-year property: Residential rental property (the building structure).

• 39-year property: Nonresidential real property (office buildings, retail, warehouses, industrial facilities).

MACRS property classes include 3, 5, 7, 15, 27.5, and 39-year categories, among others. MACRS property classes determine recovery periods for depreciation, so misclassifying an asset-say, treating 7-year office furniture as 5-year equipment-can materially accelerate or delay deductions and create audit exposure.

The IRS classifies assets by "asset class" codes in Publication 946, Appendix B. For real estate investors and CPAs managing large portfolios, detailed fixed-asset or cost segregation reports can map each asset component to the correct class and recovery period.

How to Determine Depreciable Basis Before Using the Tables

IRS depreciation tables apply only to the depreciable basis, not necessarily the full purchase price. Before you touch any table, you need to establish the correct basis.

What typically goes into basis:

• Purchase price of the asset

• Sales tax paid at acquisition

• Delivery and shipping costs

• Installation and testing expenses

• Required improvements made before placing the asset in service

What reduces basis before applying the tables:

• Any Section 179 deduction elected

• Any special depreciation allowance (bonus depreciation) claimed

• Salvage value does not reduce basis under MACRS-MACRS tables depreciate to zero

For rental property and other real estate, you must separate land (which is non-depreciable) from the building and other depreciable components. Common methods include using property tax assessment allocations or ordering an independent appraisal.

For converted personal property-such as a home converted to rental property-the basis for depreciation is typically the lower of your adjusted basis or fair market value at the time of conversion. This distinction matters because it caps the amount you can depreciate property over its life.

Step-by-Step: Finding the Right IRS Depreciation Table

Here is the procedural path to selecting the correct table in Publication 946, Appendix A:

Step 1: Classify the property. Is it personal property (equipment, furniture, vehicles) or real property (building, structural components)?

Step 2: Determine the property class and recovery period. Cross-reference Appendix B of Pub. 946 to find the asset's property's class life and assigned recovery period.

Step 3: Select the depreciation system. Most business property defaults to GDS under the general depreciation system. If the asset is tax exempt use property, used predominantly outside the U.S., or financed with tax exempt bonds, ADS is mandatory.

Step 4: Pick the depreciation method. For GDS personal property, the default is 200% declining balance. For real property, it is straight line. For ADS, it is always straight line.

Step 5: Determine the convention. Apply the half year convention for most personal property. Check whether the mid quarter convention is triggered. Use the mid month convention for all real property.

Example walkthrough: You purchase $50,000 of office furniture and place it in service in June 2026.

• It is personal property → not real property.

• Appendix B classifies office furniture as 7-year property under GDS.

• GDS applies (no ADS requirement).

• Default method: 200% declining balance.

• Convention: half year (assuming no mid quarter trigger).

• Result: use Table A-1, 7-year column.

Year 1 depreciation percentage from Table A-1 for 7-year property is 14.29%. Multiply $50,000 × 14.29% = $7,145.

Using Depreciation Tables for 3–20 Year Personal Property

Table A-1 of Publication 946 is the workhorse table for most personal property. It covers 3-, 5-, 7-, 10-, 15-, and 20-year property using GDS with the 200% declining balance method and the half year convention.

Each row corresponds to a recovery period, and each column corresponds to a tax year within that period. The percentages across all years add up to 100%.

For 5-year property under 200% DB with half-year convention, the schedule looks approximately like this:

For 7-year property, Year 1 is approximately 14.29%, Year 2 is 24.49%, and subsequent years decline until the built-in switch to straight line takes over.

To calculate depreciation for any year, multiply the asset's depreciable basis (after subtracting Section 179 and bonus depreciation) by the table percentage. You get the depreciation deduction directly-no manual switching between methods required. Segtax automates these lookups based on asset classification, pulling the correct percentage from the corresponding table.

The same structural logic applies when using alternate tables for the 150% declining balance method (Table A-14) or mid quarter convention (Tables A-2 through A-5), just with different percentage columns.

Special Tables for Residential Rental Property (27.5 Years)

Residential rental property is depreciated using straight line depreciation over a 27.5-year recovery period under GDS. The recovery period for residential rental property is 27.5 years, and it uses the mid month convention rather than the half year convention.

The IRS real property tables (Table A-6 in Appendix A) list annual percentages by the month the property was placed in service. Because of the mid month convention, a building placed in service in January gets a larger first-year deduction than one placed in service in December.

Example: You purchase a small apartment building for $500,000 total, allocate $100,000 to land, and place the $400,000 building portion in service in July 2026.

• Table A-6 shows the first-year percentage for property placed in service in month 7 (July) is approximately 1.667%.

• Year 1 depreciation: $400,000 × 1.667% = $6,668.

• Years 2 through 27: approximately 3.636% per year, or about $14,544 annually.

• Year 28: the remaining balance, adjusted for the mid month convention in the final year.

Accurate rental property depreciation is important not only for annual tax deductions but also because it sets the depreciation recapture amount when the property is eventually sold. Depreciation recapture applies if a depreciated asset is sold for more than its adjusted basis, turning earlier tax savings into taxable income taxed at up to 25% for real property.

Segtax's cost segregation capabilities can break that $400,000 building into 5-, 7-, and 15-year components plus 27.5-year structural elements, each using its own depreciation table. This approach can dramatically increase first-year deductions. Learn more in The Essential Guide to Rental Property and Depreciation.

Depreciation Tables for Nonresidential Real Property (39 Years)

Nonresidential real property-offices, industrial facilities, retail buildings, warehouses-is depreciated over 39 years using straight line under GDS and the mid month convention. Under certain Alternative Depreciation System rules, the recovery period extends to 40 years.

The IRS provides Table A-7a in Appendix A for 39-year nonresidential real property. Like the residential tables, the first-year percentage varies by the month the property was placed in service.

Example: A $2.5 million commercial office building is placed in service in October 2025 (building portion only, land excluded).

• Table A-7a shows the first-year percentage for month 10 (October) is approximately 0.535%.

• Year 1 depreciation: $2,500,000 × 0.535% = $13,375.

• Years 2 through 39: approximately 2.564% per year, or about $64,100 annually.

• Year 40: the remaining balance per the mid month convention.

That $13,375 first-year deduction on a $2.5 million asset is modest-which is exactly why cost segregation studies are so valuable for commercial property. By reclassifying portions of the building into 5-, 7-, and 15-year classes, investors can shift significant basis from the 39-year table to faster tables in Appendix A. A cost segregation study example illustrates this process step by step.

When ADS is required or elected, the ADS depreciation tables show a 40-year recovery period for nonresidential real property, still using straight line and mid month convention.

Alternative Depreciation System (ADS) and Its Tables

The Alternative Depreciation System is a straight line depreciation system with longer recovery periods. ADS requires straight line depreciation over longer recovery periods than GDS. It is mandatory for:

• Tax exempt use property

• Certain property used predominantly outside the U.S.

• Property financed with tax exempt bonds

• Certain listed property that fails the business use test

• Property for which ADS is required under specific provisions of the Internal Revenue Code

ADS can also be elected voluntarily, sometimes for foreign tax credit planning or to smooth income.

ADS has its own tables in Appendix A (Tables A-8 through A-13a) with straight line percentages across longer lives. For example:

Under ADS, that 7-year office furniture becomes 10-year property with straight line, producing smaller annual deductions but a smoother expense profile. The trade-off: you lose the front-loaded benefit of accelerated depreciation methods.

Pros and cons of ADS:

• Pro: Compliance with mandatory ADS requirements; smoother income for entities that prefer it

• Con: Smaller annual depreciation deduction; lost opportunity for accelerated deductions in early years

Segtax's classification engine can flag where the Alternative Depreciation System is mandatory and automatically apply the correct ADS tables to those assets.

Depreciation Method: Straight Line vs. Declining Balance in the Tables

The depreciation method you choose shapes how the percentages are distributed across the recovery period in the IRS depreciation tables.

Straight line depreciation spreads the deduction evenly across the recovery period. For a 5-year asset using straight line with half year convention, you get roughly 10% in Year 1 (half year), then 20% per year for Years 2–5, and 10% in Year 6.

The 200% declining balance method and 150% declining balance method front-load deductions. For a 5-year asset under 200% DB with half year convention, Year 1 is 20% and Year 2 jumps to 32%-substantially more than straight line early on. Accelerated depreciation methods reduce taxable income significantly in the early years after purchasing an asset.

The IRS tables already build the switch from declining balance to straight line into the percentages. When the straight line amount exceeds the declining balance amount (typically partway through the recovery period), the table switches methods automatically. You simply follow the published percentage sequence.

Here is a comparison for 5-year property:

Lower tax liabilities in the early years provide businesses with improved cash flow, enabling reinvestment opportunities-which is why most businesses prefer accelerated methods when allowed.

Method selection for each asset is an accounting method choice. Changing methods later often requires IRS approval via Form 3115, so it is important to make the right election up front.

Depreciation Conventions: Half-Year, Mid-Quarter, and Mid-Month

Conventions determine at what point during the year an asset is treated as placed in service, and that timing is baked into the Year 1 (and final year) percentages in the IRS depreciation tables.

Half year convention. This is the default for most personal property under MACRS. The tables assume a half-year of depreciation in Year 1 and in the year of disposition, regardless of the actual date. If you place a machine in service on January 15 or November 28, you still get the same Year 1 percentage from Table A-1.

Mid quarter convention. This rule kicks in when more than 40% of the total basis of tangible personal property is placed in service during the last three months of the tax year. When triggered, you must use the mid quarter convention and the corresponding tables (Tables A-2 through A-5 in Pub. 946) for all affected property that year. This reduces the first-year percentage for Q4 acquisitions and adjusts it for Q1–Q3 as well. The 40% test regulation defines the calculation mechanics.

Mid month convention. Real property-both residential rental property and nonresidential real property-always uses the mid month convention. The first-year and final-year percentages vary based on the specific month placed in service, as shown in Tables A-6, A-7a, and related real property tables.

Quick examples:

• Half year: $100,000 of machinery placed in service in September. Under Table A-1 (7-year), Year 1 = 14.29% = $14,290.

• Mid quarter trigger: A business buys $200,000 of equipment total in the tax year-$50,000 in March and $150,000 in November. Since 75% of basis was placed in service in Q4, mid quarter convention applies to all property that year. You use Tables A-2 through A-5 instead of A-1.

• Mid month: A rental property placed in service in October. Table A-6 shows a first-year percentage that reflects only 2.5 months of depreciation.

Using Depreciation Tables for Rental Property Depreciation

Rental property depreciation ties directly to the appropriate IRS depreciation tables, and getting it right protects both your annual deductions and your gain calculations on sale.

The rules differ by property type:

• Residential rental property uses 27.5-year straight line with mid month convention (Table A-6).

• Commercial rental property (nonresidential real property) uses 39-year straight line with mid month convention (Table A-7a).

• Assets within rental properties-appliances, carpeting, HVAC units, land improvements-may be 5-, 7-, or 15-year property and use the corresponding personal property tables like Table A-1.

To apply the correct table to each component in a rental property:

1. Allocate the purchase price between land, building structure, and shorter-life improvements.

2. Apply the 27.5- or 39-year table to the building structure.

3. Apply the appropriate 5-, 7-, or 15-year table to identified personal property and land improvements.

Accurate rental property depreciation improves cash flow through larger early-year deductions but also establishes the correct accumulated depreciation amount for depreciation recapture when the residential property or commercial property is eventually sold.

A Segtax cost segregation study breaks down a multifamily or mixed-use building into multiple asset classes, each tied to different IRS depreciation tables. This maximizes tax acceleration while keeping the depreciation schedule IRS-defensible.

Bonus Depreciation and How It Interacts With the Tables

Bonus depreciation is a special depreciation allowance applied before you use the regular MACRS tables. It provides an "above-table" percentage deduction for qualified property placed in service during certain dates.

Here is the current landscape:

• 100% bonus depreciation was available until 2022 for qualified property acquired and placed in service before January 1, 2023.

• The rate then phased down: 80% for 2023, 60% for 2024, and bonus depreciation allows a 40% deduction for 2025 for property acquired before January 20, 2025.

• The One Big Beautiful Bill Act reinstated 100% bonus depreciation for qualified property acquired after January 19, 2025. This applies permanently to eligible property with a MACRS recovery period of 20 years or less, plus certain qualified improvement property, aircraft, and long-production-period property.

Bonus depreciation applies to qualified property placed in service, meaning the property must be both acquired and placed in service during the applicable period. Unlike Section 179, bonus depreciation can be claimed without dollar limits-there is no cap on the total amount.

How bonus interacts with the tables: You reduce the asset's basis by the bonus amount first, then apply the IRS depreciation table percentages to the remaining basis.

Example: You purchase a $250,000 machine (5-year property) and place it in service in August 2026. Assume 100% bonus depreciation applies because the property was acquired after January 19, 2025.

• Bonus depreciation: $250,000 × 100% = $250,000 deduction in Year 1.

• Remaining basis: $0.

• No further MACRS table depreciation needed.

If bonus were only 40% (for property acquired before January 20, 2025 and placed in service in 2025):

• Bonus: $250,000 × 40% = $100,000.

• Remaining basis: $150,000.

• Year 1 MACRS (Table A-1, 5-year, half year): $150,000 × 20.00% = $30,000.

• Total Year 1 deduction: $130,000.

Segtax's engine automatically applies the correct bonus depreciation rules by checking placed-in-service dates and property type for qualified property acquired within each window, then feeds the reduced basis into the appropriate IRS depreciation tables.

Section 179 Expensing vs. Using Depreciation Tables

Section 179 allows immediate expensing of qualifying property costs in the year placed in service, up to annual dollar and income limits, instead of spreading deductions across years using the MACRS depreciation tables.

For the 2025 tax year, the Section 179 deduction limit is $1,250,000. The deduction phases out dollar-for-dollar after $3,130,000 in purchases of eligible property during the year. Qualifying property includes machinery, equipment, and certain vehicles, as well as certain qualified improvement property.

The ordering rule is critical:

1. Section 179 is applied first to the cost basis.

2. Bonus depreciation (special depreciation allowance) is applied next to the remaining basis.

3. MACRS table depreciation applies to whatever basis remains.

The Section 179 deduction cannot exceed your business's taxable income in a given year, though any unused amount can be carried forward.

Comparison example: $80,000 of office furniture placed in service in 2026 (7-year property)

Both Section 179 and 100% bonus achieve a full Year 1 write-off in this case, but the mechanics differ. Section 179 has dollar and income limits; bonus depreciation does not. For volatile income years, spreading deductions via the MACRS tables may help smooth taxable income.

Segtax models both Section 179 and table-based depreciation scenarios, giving CPAs and investors side-by-side projections to determine which approach best fits their projected income and cash-flow plans.

Listed Property: Special Rules and Table Usage

Listed property refers to assets with a high potential for personal use-passenger automobiles, certain phones, and some equipment used outside a regular business location. These assets face stricter depreciation rules under MACRS.

Key rules for listed property:

• If qualified business use is more than 50%, you can use accelerated depreciation methods, Section 179, and bonus depreciation.

• If business use drops to 50% or less, you must switch to the straight line method using ADS tables, and you may owe depreciation recapture for the difference between accelerated and straight line amounts already claimed.

• Passenger automobiles classified as listed property are subject to annual "luxury auto" caps that limit the allowable depreciation in each year, regardless of what the MACRS table percentage would otherwise produce.

When listed property fails the predominant qualified business use test after initially qualifying, the depreciation must be recomputed using straight line, changing which IRS depreciation table column applies.

Segtax can flag listed property in fixed-asset imports and automatically apply the appropriate limitations and straight line columns from the relevant tables, reducing the risk of noncompliance.

Nonresidential Real Property vs. Land Improvements in the Tables

One of the most common-and costly-mistakes taxpayers make is depreciating all site-related costs over 39 years as nonresidential real property when some items actually qualify as 15-year land improvements.

Here is the contrast:

• Nonresidential real property: 39-year straight line using real property tables. Slow deductions.

• Land improvements (parking lots, sidewalks, landscaping, fencing, exterior lighting): Generally 15-year property, often eligible for bonus depreciation, and using the 15-year column under GDS Table A-1. Much faster deductions.

Example: A $3 million office complex has $300,000 properly identified as 15-year land improvements through a cost segregation study. The rest ($2.7 million, excluding land) stays in the 39-year class.

If those land improvements also qualify for 100% bonus depreciation (property acquired after January 19, 2025), the Year 1 deduction on that $300,000 jumps to the full $300,000-compared to $7,692 per year if incorrectly buried inside the 39-year building schedule.

Cost segregation is the practical tool for performing this separation. Learn more about what a professional study actually reviews to understand how this process works in practice.

Common Mistakes When Using IRS Depreciation Tables

Here are the errors that most frequently cause problems on tax returns and during audits:

• Using the wrong property class. Treating office furniture as 5-year instead of 7-year property, or classifying certain property in the wrong asset class. Fix: Always verify against Appendix B of Pub. 946 before selecting a table row.

• Ignoring the mid quarter convention trigger. Defaulting to the half year convention when more than 40% of tangible personal property basis was placed in service in Q4. Fix: Run the 40% test before finalizing Year 1 depreciation for all personal property.

• Not separating land from building. Applying depreciation table percentages to the full purchase price including land. Land is not depreciable. Fix: Use property tax allocations or an appraisal to isolate the building basis.

• Failing to adjust basis before applying table percentages. Applying the MACRS table percentage to the original cost without subtracting Section 179 or bonus depreciation first. Fix: Follow the ordering rule-Section 179, then bonus, then tables on the remaining basis.

• Using GDS tables when ADS is required. Applying accelerated depreciation to tax exempt use property or other excepted property that mandates ADS. Fix: Review ADS requirements before selecting a table.

• Misapplying the mid month convention. Using the wrong month column in the real property tables, or using the half year convention for real property. Fix: Always confirm the month placed in service and use the corresponding column in Table A-6 or A-7a.

Using audit-ready, reconciled fixed-asset registers and automated classification tools-such as Segtax-reduces manual lookups and the risk of assigning the wrong table or method.

Worked Example: Office Furniture Using MACRS Depreciation Tables

Let's walk through a complete numerical example.

Asset: $50,000 of office furniture placed in service on March 1, 2026.

Step 1: Confirm the class. Publication 946, Appendix B classifies office furniture as 7-year property under GDS.

Step 2: Select the table. GDS, 200% declining balance method, half year convention → Table A-1, 7-year property column.

Step 3: Apply the percentages.

The table embeds the switch from the 200% declining balance method to straight line when straight line yields a higher amount (around Year 5 for 7-year property). You just follow the percentage sequence-no manual switching required.

ADS sidebar: If ADS were elected or required, this furniture would use a 10-year straight line schedule and the corresponding ADS table. Year 1 would be approximately 5% (half year convention), then 10% per year for Years 2–10, and 5% in Year 11. Smaller annual deductions, but compliance with ADS-required situations.

Worked Example: Rental Property with Mixed Asset Classes

Scenario: A $1.2 million small apartment building is purchased and placed in service on June 15, 2026. The allocation is:

• Land: 20% = $240,000 (not depreciable)

• Building structure: $810,000 (27.5-year residential rental property)

• Appliances (identified via cost segregation): $60,000 (5-year property)

• Land improvements (identified via cost segregation): $90,000 (15-year property)

Each component uses a different IRS depreciation table.

Building structure ($810,000) - Table A-6, 27.5-year, mid month, June (month 6):

• First-year percentage for month 6: approximately 1.970%

• Year 1 depreciation: $810,000 × 1.970% = $15,957

Appliances ($60,000) - Table A-1, 5-year, 200% DB, half year:

• With 100% bonus depreciation (property acquired after January 19, 2025): $60,000 × 100% = $60,000

• Remaining basis for MACRS tables: $0

Land improvements ($90,000) - Table A-1, 15-year, 150% DB, half year:

• With 100% bonus depreciation: $90,000 × 100% = $90,000

• Remaining basis for MACRS tables: $0

Total 2026 depreciation deduction: $15,957 + $60,000 + $90,000 = $165,957

Without cost segregation (entire $960,000 depreciable basis over 27.5 years):

• Year 1: $960,000 × 1.970% = $18,912

The cost-segregated approach produces $165,957 in Year 1 deductions versus $18,912-nearly nine times as much. That accelerated income tax reduction can meaningfully improve cash flow for reinvestment. See how a cost segregation study works in plain English.

How Cost Segregation Changes Which Tables You Use

Cost segregation is an engineering-based analysis that identifies personal property and land improvements embedded in a building so those components can use shorter MACRS recovery periods and more favorable depreciation tables.

A typical commercial building acquired for $5 million might have 20–40% of its cost reclassified from 39-year nonresidential real property to 5-, 7-, and 15-year classes. Cost segregation studies can reclassify building components to shorter recovery periods, shifting those amounts from the slow 39-year table to the faster GDS tables in Appendix A. Cost segregation can significantly increase first-year tax deductions for property owners, and a well-executed cost segregation study can yield over $120,000 in tax benefits over five years for many commercial properties.

Before and after comparison for a $5 million commercial building:

That gap exists because the reclassified components qualify for accelerated depreciation and bonus depreciation under the shorter-life tables, while the remaining building structure continues at the 39-year rate.

Segtax standardizes and documents this process, matching each building component to the correct asset class, class life, useful life, and depreciation table for IRS-defensible results. The output feeds directly into a general asset account structure and Form 4562 reporting.

Tracking and Updating Depreciation Schedules Over Time

Once you start using IRS depreciation tables for an asset, you need to maintain a depreciation schedule that tracks:

• Original cost and any basis adjustments

• The depreciation method and convention elected

• The specific table and line being used each year

• Accumulated depreciation to date

• The recovery year you are in

Taking specific tax actions requires meticulous tracking of basis, recovery periods, asset classes, and eligibility requirements. Disposals, partial dispositions, improvements, and method changes (via Form 3115) can alter which percentages apply and may require reference to additional IRS guidance.

Best practices for maintaining your depreciation schedule:

• Reconcile your asset register to the general ledger annually.

• Review the mid quarter convention test each year before finalizing Year 1 deductions.

• Document placed-in-service dates with closing statements, invoices, or certificates of occupancy.

• Store the table reference (e.g., "Pub. 946 Table A-1: 7-year property") alongside each asset record.

• Report depreciation calculations on Form 4562, which is used for reporting asset depreciation on tax returns.

Dedicated fixed-asset and cost segregation software-like Segtax-stores all of this data in one place and flags inconsistencies before they become audit issues.

Accurate, well-documented use of IRS depreciation tables not only optimizes tax savings but also makes audits and property sales (where depreciation recapture on ordinary income matters) far more manageable.

How Segtax Helps You Apply IRS Depreciation Tables Accurately

Segtax is an AI-enabled cost segregation and depreciation platform that automates the most error-prone parts of working with IRS depreciation tables:

• Data ingestion. Segtax ingests closing statements, construction cost data, and fixed-asset listings to establish correct basis for each component.

• Asset classification. The platform classifies assets into IRS property classes-3-, 5-, 7-, 15-, 27.5-, and 39-year-using engineering-based methodology aligned with IRS guidance.

• System determination. Segtax identifies whether GDS or the Alternative Depreciation System applies based on property type and use.

• Table selection and application. The engine automatically selects and applies the appropriate IRS depreciation tables and percentages, accounting for conventions, bonus depreciation eligibility, and Section 179 elections.

Every study combines automation with human specialist review to produce audit-ready schedules that document the depreciation method (straight line vs. declining balance), the convention (half year, mid quarter, mid month), and the specific tables used for each asset or component.

For CPAs and real estate investors, Segtax offers:

• Free feasibility estimates within 24 hours showing expected acceleration from reclassifying nonresidential real property and land improvements to shorter property classes

• Full cost segregation studies and depreciation schedules delivered in about three weeks

• Outputs that integrate directly into tax prep workflows for Forms 4562 and supporting schedules, compatible with most tax preparation software

If you own income producing property with a basis above $300,000-or you are a CPA managing clients who do-the difference between using a single 39-year or 27.5-year table and properly classifying components across multiple tables can mean tens of thousands of dollars in tax deductions accelerated into the current tax year. Explore a free feasibility estimate from Segtax to see how much depreciation acceleration your qualified business or investment property may be leaving behind.