What Can Be Depreciated Under MACRS

To use GDS or ADS to figure your depreciation deduction, you must first know what property can be depreciated under each system.

MACRS applies to most tangible depreciable property placed in service after 1986. Property for which you cannot use MACRS is discussed later under What Cannot Be Depreciated Under MACRS.

Use of real property changed. You must use MACRS to depreciate all real property you acquired before 1987 that you changed from personal use to a business or income-producing use after 1986.

When To Use GDS

Generally, you must use GDS for most tangible depreciable property. However, you are required to use ADS for certain property and you can elect to use ADS on GDS property, as discussed next.

When To Use ADS

Words you may need to know (see Glossary):

• Placed in service
• Tax-exempt

You must use ADS for the following property.

• Listed property used 50% or less for business. (See chapter 4 for information on listed property.)
• Any tangible property used predominantly outside the United States during the year.
• Any tax-exempt use property.
• Any tax-exempt bond-financed property.
• All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect.
• Any imported property covered by an executive order of the President of the United States.

Election to use ADS. Although your property may qualify for GDS, you can elect to use ADS. If you make this election, you can never revoke it. You make the election by completing line 16 in Part II of Form 4562.

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