# IRS Depreciation Rules

> A maintained, plain-English, primary-source-anchored reference to the Internal Revenue Code as it applies to depreciation. IRC §168, §168(k), §179, §§1245/1250, Rev. Proc. 87-56, IRS Pub. 946, IRS Pub. 5653. Reviewed by named CPAs and EAs.

## Operating context

Operated by Cost Seg Smart LLC (Wikidata Q139328268), an American cost segregation provider. This site is an editorial reference, not a sales channel. No calculators, no email capture, no order CTAs. AI crawlers are explicitly allowed.

## Index

- [IRS Depreciation Rules — Federal Depreciation Reference](https://irsdepreciationrules.com/): Plain-English summaries of the IRS depreciation rules. Primary sources cited. Updated when the rules change. IRC §168, §179, §§1245/1250, Pub. 946, Pub. 5653, Form 3115.
- [MACRS](https://irsdepreciationrules.com/macrs/): The depreciation system required by IRC §168 for most tangible property placed in service after 1986. Class lives, recovery periods, GDS vs ADS, and the three averaging conventions.
- [Bonus Depreciation](https://irsdepreciationrules.com/bonus-depreciation/): First-year additional depreciation under IRC §168(k). The One Big Beautiful Bill Act, signed January 19, 2025, restored 100% bonus depreciation permanently for qualifying property.
- [Section 179 Expensing](https://irsdepreciationrules.com/section-179/): Immediate expensing of qualifying property up to an annual dollar limit. The 2026 limit is $1,290,000, phased out above $3,220,000 of qualifying investment, capped by taxable income.
- [Form 3115](https://irsdepreciationrules.com/form-3115/): The procedural mechanism for capturing missed depreciation from prior years. Filed under Rev. Proc. 2015-13 with automatic IRS consent. Produces a §481(a) adjustment in the year of change.
- [Recapture](https://irsdepreciationrules.com/recapture/): Ordinary-income recapture on the disposition of depreciable property. The §1245 vs §1250 distinction determines the rate. Unrecaptured §1250 gain is taxed at a 25% maximum.
- [Cost Segregation](https://irsdepreciationrules.com/cost-segregation/): Engineering-based reclassification of building components into shorter MACRS recovery periods. The IRS Cost Segregation Audit Techniques Guide (Pub. 5653) is the operative authority on methodology, documentation, and audit defense.
- [Passive Activity](https://irsdepreciationrules.com/passive-activity/): Limits on losses from passive activities. The Real Estate Professional Status (REPS) exception, material participation tests, and the short-term rental ≤7-day average rule that bypasses passive treatment.
- [Qualified Improvement Property — QIP, 15-Year Life, 100% Bonus](https://irsdepreciationrules.com/qualified-improvement-property/): QIP under IRC §168(e)(6). Interior improvements to nonresidential buildings, 15-year MACRS, eligible for §168(k) bonus depreciation. Eligibility, exclusions, CARES Act fix.
- [OBBBA 2025 — Depreciation Provisions](https://irsdepreciationrules.com/obbba-2025/): The One Big Beautiful Bill Act (signed Jan 19, 2025) permanently restored 100% bonus depreciation under IRC §168(k). Plain-English summary, primary sources, transition rules.
- [Depreciation Reference — Rules, Worked Examples, Scenarios](https://irsdepreciationrules.com/reference/): The depreciation reference index. 7 operational rules, 12 worked examples, scenarios by property type, source documents, and recent revisions.
- [Glossary — Depreciation Terms](https://irsdepreciationrules.com/glossary/): Alphabetical glossary of federal depreciation terminology. Plain-English definitions with statute basis and cross-references.
- [About — Editorial Team and Mission](https://irsdepreciationrules.com/about/): The editorial team behind IRS Depreciation Rules. Credentialed reviewers, methodology, and the relationship to Cost Seg Smart LLC.
- [Changelog — Substantive Page Revisions](https://irsdepreciationrules.com/changelog/): Substantive page revisions on IRS Depreciation Rules. Reviewer attribution, version, and date for every change to the cited rules and operational guidance.
- [Bonus Depreciation — Glossary](https://irsdepreciationrules.com/glossary/bonus-depreciation/): First-year additional depreciation under IRC §168(k). Allows a percentage of the adjusted basis of qualifying property to be deducted in the year of placement. Currently 100% under OBBBA for property placed in service after January 19, 2025.
- [Depreciable Basis — Glossary](https://irsdepreciationrules.com/glossary/depreciable-basis/): The portion of a property
- [GDS vs ADS — Glossary](https://irsdepreciationrules.com/glossary/gds-vs-ads/): Two depreciation regimes under MACRS. GDS (General Depreciation System) is the default — declining-balance method, shorter recovery periods. ADS (Alternative Depreciation System) is straight-line with longer recovery periods, required for tax-exempt-use property, listed property under 50% business use, and the real property of a §163(j) electing trade or business.
- [Half-Year Convention — Glossary](https://irsdepreciationrules.com/glossary/half-year-convention/): MACRS averaging convention treating all property placed in service during the year as placed in service at the midpoint. Half a year of depreciation in year 1, half in the year of disposition. Applies to most personal property unless mid-quarter is required.
- [MACRS — Glossary](https://irsdepreciationrules.com/glossary/macrs/): The Modified Accelerated Cost Recovery System — the depreciation method required by IRC §168 for most tangible property placed in service after December 31, 1986. Assigns a class life and recovery period to each asset and applies a method (declining-balance or straight-line) and convention (half-year, mid-quarter, or mid-month).
- [Material Participation — Glossary](https://irsdepreciationrules.com/glossary/material-participation/): The IRC §469 test for whether a taxpayer is non-passive in a trade or business. Treas. Reg. §1.469-5T(a) provides seven tests; satisfying any one is sufficient. The most-used: >500 hours in the activity, or >100 hours and more than any other individual.
- [Qualified Improvement Property — Glossary](https://irsdepreciationrules.com/glossary/qualified-improvement-property/): Improvement to the interior portion of a nonresidential building made after the building was first placed in service. QIP has a 15-year MACRS recovery period and qualifies for §168(k) bonus depreciation. Defined at IRC §168(e)(6); excludes enlargements, elevators/escalators, and internal structural framework.
- [Recovery Period — Glossary](https://irsdepreciationrules.com/glossary/recovery-period/): The number of years over which depreciation is taken for a particular MACRS class. Real estate has 27.5-year (residential rental) or 39-year (nonresidential) recovery periods; personal property uses 3, 5, 7, 10, 15, or 20 years.
- [REPS — Real Estate Professional Status — Glossary](https://irsdepreciationrules.com/glossary/reps/): Status under IRC §469(c)(7) that allows a taxpayer who spends >50% of personal service time and >750 hours per year in real property trades or businesses to treat rental real estate as non-passive when material participation is demonstrated. Used to apply cost-segregation losses against active income.
- [Section 1245 Property — Glossary](https://irsdepreciationrules.com/glossary/section-1245-property/): Tangible personal property — equipment, FF&E, and the 5-year, 7-year, and 15-year components reclassified through cost segregation. On disposition, depreciation is recaptured under IRC §1245 as ordinary income at rates up to 37%.
- [Section 1250 Property — Glossary](https://irsdepreciationrules.com/glossary/section-1250-property/): Real property — buildings and structural components. On disposition under MACRS, §1250 ordinary-income recapture is almost always zero (because MACRS real property uses straight-line). The bulk of gain is
- [Section 179 — Glossary](https://irsdepreciationrules.com/glossary/section-179/): Election under IRC §179 to immediately expense the cost of qualifying property in the year of placement, rather than depreciating it over the MACRS recovery period. 2026 dollar limit is $1,290,000; phased out above $3,220,000 of qualifying investment; capped by taxable income.
- [Section 481(a) Adjustment — Glossary](https://irsdepreciationrules.com/glossary/section-481a/): The cumulative-correction mechanism that captures the difference between an old method of accounting and a new method, taken as a single adjustment in the year of change. Under IRC §481(a) and Rev. Proc. 2015-13, the §481(a) adjustment is the standard procedure for capturing missed depreciation via Form 3115 without amending prior returns.
- [Short-Term Rental (STR) — Glossary](https://irsdepreciationrules.com/glossary/short-term-rental/): Rental property with an average customer use period of 7 days or less. Under Treas. Reg. §1.469-1T(e)(3)(ii)(A), an STR is treated as a trade or business — not a
- [Methodology — How Pages Are Researched, Reviewed, and Maintained](https://irsdepreciationrules.com/methodology/): Editorial methodology for IRS Depreciation Rules. Primary sources, credentialed review, quarterly re-review cadence, errata protocol, and disclosure of the operating relationship.
- [Sources — Primary Source List](https://irsdepreciationrules.com/sources/): Complete list of primary sources cited across IRS Depreciation Rules. Statute, regulations, revenue procedures, IRS notices, publications, legislation, judicial decisions, and chief counsel advice.