Depreciation Worksheet

General Information

Use this worksheet to enter your depreciation of all kinds of property, including furniture and real estate.

Form and Copy Number (Lines 2a and 2b)

Please enter these with care.

We'll automatically create a copy of Form 4562 for each Form and Copy you specify, but only if required by the IRS.

General Asset Account Election (Line 9a)

If you place an "X" in the box on line 9a of the Depreciation Worksheet to indicate that you're electing to group some similar assets together in a "general asset account," you will need to complete a single copy of the Depreciation Worksheet for ALL the assets that you're grouping in this particular "general asset account." That is because the assets in each general asset account are depreciated as a single asset.

We'll carry the "X" from line 9a of the Depreciation Worksheet to line 18 of Form 4562 if certain conditions are met:

Section 179 (Line 8c )

We limit your section 179 amount as follows:

Business Use Percent, Investment Use Percent (Lines 5a and 5b)

The total of these two entries may not be more than 100%.

Sale this Year (Line 3b)

If you sold the property this year, we'll adjust your depreciation accordingly. For ACRS 3, 5, and 10 year property, no depreciation is allowed in the year of sale. Otherwise, we give a fraction of a full year's depreciation.

Usually, this fraction works out to (1 - the "convention" amount). For example, for a half-year convention, we would give a half-year's depreciation upon a sale. For a "full-month" convention, for an asset that had been sold in October, we would typically give 9/12 of a year's depreciation.

If you both bought and sold the asset this year, you would be entitled to some depreciation, but you would have to "recapture" up to the full amount as gain on the sale. In order to make life simpler, we simply set depreciation to zero.

If you sold the asset this year, but this would have been the last year for depreciation, and you sold in a later month than the month you placed the asset in service, then we give you the full year's depreciation.

Depreciation Codes (Line 4c)

Note about Depreciation Codes: If you can use codes 1-17 or 23-26 (i.e., you fall under MACRS or ACRS), you generally must use them. Codes 18-22 are for those items that don't fall under one of the other codes.

The depreciation codes (1-26) are as follows:

1 = MACRS 3 year.

2 = MACRS 5 year.

3 = MACRS 7 year.

4 = MACRS 10 year.

5 = MACRS 15 year.

6 = MACRS 20 year.

7 = MACRS residential rental property.

8 = MACRS non-residential real property placed in service before 5/13/93.

9 = ACRS 3 year.

10 = ACRS 5 year.

11 = ACRS 10 year.

12 = ACRS 15 year public-utility property.

13 = ACRS 15 year real property.

14 = ACRS 15 year low income housing in service before 5/9/85.

15 = ACRS 15 year low income housing in service after 5/8/85.

16 = ACRS 18 year real property in service after 6/22/84.

17 = ACRS 19 year real property.

18 = Straight line. (Generally for property that is not MACRS or ACRS.)

19 = 125% declining balance. (Generally for property that is not MACRS or ACRS.)

20 = 150% declining balance. (Generally for property that is not MACRS or ACRS.)

21 = 200% declining balance. (Generally for property that is not MACRS or ACRS.)

22 = Sum-of-the-years' digits. (Generally for property that is not MACRS or ACRS.)

23 = ACRS 18 year real property in service 3/16/84 through 6/22/84.

24 = MACRS non-residential real property placed in service on or after 5/13/93.

25 = MACRS 25 year.

26 = Computer software under s. 167(f).

Alternative Method (Line 6a)

This can apply only for MACRS or ACRS depreciation. We'll not allow it to be selected for a depreciation code that is not part of either of these two systems.

Number of Years (Line 9b)

We fill this one in if you use the regular method of MACRS or ACRS depreciation. If you pick straight line, or if you use the alternate method, we generally leave this for you to enter. (But if you pick the alternate method for MACRS real estate, we use 40 years, as required.)

Listed Property (Line 4d)

Real estate should never be listed property. If a property is "listed property," and if its business use was 50% or less (ignoring investment use), and it was placed in service after June 18, 1984, then these statements apply:

  1. You must use the alternative method for this and all subsequent years. (We select "Alternate Method" for you.)

  2. If the property was placed in service in 2010, then we set the section 179 amount to zero.

  3. If the property was placed in service before 2010, then you should "recapture" your section 179 deduction on Form 4797 and enter zero on this Worksheet as the section 179 amount.

150% Election (Line 9c)

This is available only for MACRS 3, 5, 7, or 10 year property. In all other cases, we set this to "No."

These paragraphs will describe some of the main approaches to depreciation, and how we calculate them.

MACRS regular calculations. We use the declining balance approach specified by MACRS. Here is an example of that calculation:

Example: A piece of equipment costing $25,000, which is 7 year MACRS property, is placed in service in August 1989. We use the 200% declining balance method, as required. (If you had elected the 150% rate, or if this were farming property, then we would have used the 150% declining balance method). If the section 179 deduction had been $10,000, then the basis we're depreciating is $15,000 (that is, $25,000 less $10,000).

For each year, we calculate the depreciation using the declining balance approach and also using the straight line approach. Each year, we give whichever approach yields the highest depreciation.

Here is how we would do these calculations:

Asset depreciated 200%DB for 7 yrs, placed in service in August.

Because of "half-year" convention of MACRS 7-year property, the property is treated as having been placed in service on June 30 (6 months/12 months).

In first year:

DB% is 200% of (1/7) * 15000 * (6 months/12 months)

SL% is (1/7) * 15000 * (6 months/12 months)

In subsequent years:

DB% is calculated as 200% of (1/7) * End Bal

SL% is calculated as 1/# years left * End Bal, where "# years left" = 7 - # yrs so far + (6/12)

Declining balance methods. If you select a declining balance method, we always automatically switch to straight line when that approach yields a higher deduction. This is permitted by the IRS.

ACRS methods. For the ACRS methods, we have encoded the actual ACRS tables published by the IRS. We don't perform any calculation; we just look up your depreciation in the table. There are too many possible permutations of the MACRS rules to make this a feasible approach for MACRS. Instead, for MACRS, we perform the depreciation calculation, using the approach outlined above.

Mid-quarter Convention (Line 9e)

This entry is for you to make. This convention is set the year you placed the asset in service and is the same for every year after that.

You can find what to put on this line by looking on your tax return for the year this asset was placed in service. Look on Form 4562 (or an attached worksheet) for this asset.

Farming Property (Line 9f)

If the related form is Schedule F or Form 4835, then we default "Farming Property" to "Y." Otherwise, we default "Farming Property" to "N." You're free to change this default (by overriding).

Convention (Line 10b)

This refers to the assumption about when the asset was placed in service. For most MACRS property (other than real estate) the "half-year" convention is used. This means that we assume that the property was placed in service on June 30, regardless of when it was actually placed in service.

The "mid-quarter" convention means that we assume that the property was placed in service in the midpoint of the quarter in which it was actually placed in service (e.g., on Feb. 15, May 15, August 15, or November 15, for the 1st, 2d, 3d and 4th quarter respectively). (The "mid-quarter" convention can apply only for MACRS 3 year through MACRS 25 year property.)

The "full month" convention assumes that it was placed in service on the first day of the month in which it was actually placed in service.

The "mid month" convention assumes that it was placed in service on the 15th day of the month in which it was actually placed in service.

Tables from IRS Publication 534 for 18-Year and 19-Year Real Property under Alternate ACRS

These tables come from IRS Publication 534, Depreciating Property Placed in Service before 1987. You need them only if you're depreciating 18-year or 19-year real property under alternate ACRS.

Table 7. 18-Year Real Property (Placed in Service after June 22, 1984) (If Alternate ACRS Method Elected over 18-Year Period)

Table 9. 19-Year Real Property (If Alternate ACRS Method Elected over 19-Year Period)

Table 10. 18-Year Real Property (Placed in Service after June 22, 1984) (If Alternate ACRS Method Elected over 35-Year Period)

Table 13. 19-Year Real Property (If Alternate ACRS Method Elected over 35-Year Period)

Table 14

18-Year Real Property (Placed in Service after June 22, 1984)

19-Year Real Property (If Alternate ACRS Method Elected over a 45-Year Period)