FEDERAL DEPRECIATION REFERENCE · VOLUME I · 2026 EDITION
The federal depreciation rules, written for the people who have to read them.
A plain-English, primary-source-anchored reference to IRC §168, §179, §§1245/1250, Rev. Proc. 87-56, and the IRS publications that interpret them. Every rule is dated, sourced, and cross-linked to the worked examples that show it in operation.
RULES INDEXED
7
SOURCES TRACKED
147
WORKED EXAMPLES
12
SCENARIO PAGES
38
§ — FINDING OF RECORD
+$468,840
Year-1 deduction increase from cost segregation on a $1.2M residential rental placed in service 2023 — net of straight-line baseline, before §469 limitations.
CASE IDR-EX-001 · METHOD FORM 3115 · §481(a) · CALCULATION DETAIL §3 BELOW · VERIFIED 2026·05·08
| STATUTE | TOPIC · OPERATIONAL CONSEQUENCE | PRIMARY SOURCES | RELATED GUIDANCE | PAGES | UPDATED |
|---|---|---|---|---|---|
| IRC §168 | MACRS schedules Class lives, recovery periods, and conventions for the Modified Accelerated Cost Recovery System. →Sets recovery period and method · interacts with §168(k) bonus and §179 expensing | 26 U.S.C. §168 Treas. Reg. §1.168-1 Pub. 946 | 2026-05-08 | ||
| IRC §168(k) | Bonus depreciation First-year additional depreciation. OBBBA restored 100% for property placed in service after Jan 19, 2025. →First-year deduction · property ≤20-yr only · stacks with §179 · OBBBA restored 100% | 26 U.S.C. §168(k) TD 9993 Notice 2025-17 | 2026-05-08 | ||
| Pub. 5653 | Cost segregation Engineering reclassification of building components into shorter recovery periods. Audit Techniques Guide. →Reclassifies to 5/7/15-yr · enables §168(k) stacking · documentation drives audit defense | Pub. 5653 (ATG) CCA 202612008 | 2026-04-22 | ||
| Form 3115 | Change in accounting method Filing under Rev. Proc. 2015-13 to claim missed depreciation. §481(a) adjustment, automatic vs. non-automatic. →Catch-up missed depreciation · §481(a) adjustment in year of change · automatic consent | Rev. Proc. 2015-13 Treas. Reg. §1.446-1(e) Rev. Proc. 2026-08 | 2026-04-15 | ||
| IRC §469 | Passive activity rules Limitations on losses from passive activities. Real estate professional exception, material participation tests. →Caps passive losses · REPS exception · STR ≤7-day avg bypasses passive treatment | 26 U.S.C. §469 Treas. Reg. §1.469-5T Pub. 925 | 2026-03-30 | ||
| IRC §§1245·1250 | Recapture rules Ordinary-income recapture on disposition. The §1245 vs §1250 distinction and unrecaptured §1250 gain. →Ordinary-income recapture at sale · 25% unrecaptured §1250 gain · §1031 defers | 26 U.S.C. §§1245, 1250 Treas. Reg. §1.1250-1 Pub. 544 | 2026-04-03 | ||
| IRC §179 | Section 179 expensing Immediate expensing election. 2026 dollar limit $1.29M, investment cap $3.22M, taxable-income limited. →Immediate expensing · $1.29M dollar cap · $3.22M phase-out · taxable-income limited | 26 U.S.C. §179 Treas. Reg. §1.179-1 Pub. 946 | 2026-03-18 |
§ 2 · WORKED-EXAMPLE INDEX
The rules, applied to actual property
| CASE | PROPERTY · PLACED IN SERVICE | SEARCH ENTRY POINTS | YR-1 DELTA | |
|---|---|---|---|---|
| IDR-EX-001 | $1.2M duplex placed June 2023 | duplex cost seghouse hack depreciationMACRS 27.5-yr | +$468,840 | → |
| IDR-EX-002 | $900K STR purchased 2023 | STR loophole≤7-day averagematerial participation | +$382,500 | → |
| IDR-EX-003 | 12-unit MFR acquired 2025 | multifamily100% bonus restoredOBBBA §70302 | +$1,140,000 | → |
| IDR-EX-004 | Restaurant FF&E placed 2024 | §179 expensingrestaurant equipment5-yr personal property | +$96,400 | → |
| IDR-EX-005 | Self-storage facility 2024 | land improvements15-yr property60% bonus 2024 | +$612,300 | → |
| IDR-EX-006 | Medical office QIP 2025 | qualified improvement property15-yr life100% bonus | +$284,000 | → |
| IDR-EX-007 | Single-family rental 2022 (catch-up) | Form 3115§481(a)missed depreciation | +$118,200 | → |
| IDR-EX-008 | Office building TI 2024 | tenant improvementsQIP§1250 vs §1245 | +$211,900 | → |
CASE IDR-EX-001 · RESIDENTIAL RENTAL · MACRS + COST SEG + 80% BONUS
$1.2M duplex, residential rental, placed in service June 2023
Straight-line 27.5-yr (yr 1)
$22,440
5-yr personal property
$224,400
15-yr land improvements
$81,600
+ 80% bonus (2023)
$244,800
Cost seg + bonus, year 1
$491,280
| Acquisition cost (depreciable basis ex-land) | $1,020,000 | Land allocation 15% |
| MACRS recovery period (residential rental) | 27.5 yrs | IRC §168(c) |
| Straight-line first-year (mid-month June) | $22,440 | 7 months ÷ 12 ÷ 27.5 |
| Cost segregation: 5-yr reclassification (~22%) | $224,400 | Pub. 5653 §III.A |
| Cost segregation: 15-yr land improvements (~8%) | $81,600 | Rev. Proc. 87-56 Cl. 00.3 |
| Bonus depreciation (2023 phase-down: 80%) | $244,800 | TCJA §13201 (b) |
| Form 3115 §481(a) catch-up if filed in 2026 | $167,318 | Rev. Proc. 2015-13 |
A study filed via Form 3115 in 2026 produces a §481(a) adjustment in the year of change rather than amending three prior returns.
| DATE | PATH | SUBSTANTIVE CHANGE | REVIEWER | REV |
|---|---|---|---|---|
| 2026-05-08 | /bonus-depreciation/ | Updated §168(k) page to reflect IRS Notice 2026-12 clarifying placed-in-service date for binding written contracts. | EDITORIAL | v1.0.0 |
| 2026-04-22 | /obbba-2025/ | Added Treasury proposed regulations REG-114923-25 to the OBBBA implementation timeline. | EDITORIAL | v0.9.4 |
| 2026-04-15 | /form-3115/ | Revised §481(a) adjustment worked example for the new automatic consent under Rev. Proc. 2026-08. | EDITORIAL | v0.9.3 |
| 2026-04-03 | /class-lives/table/ | Reviewed all 147 asset class entries against Rev. Proc. 87-56 as updated through 2026-Q1. No changes required. | EDITORIAL | v0.9.2 |
| 2026-03-28 | /qualified-improvement-property/ | Added Chief Counsel Advice 202612008 on QIP eligibility for owner-occupied portions. | EDITORIAL | v0.9.1 |