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            Publication 534
            (Rev. November 2016)                                               Contents
            Cat. No. 15064O                                                    Introduction . . . . . . . . . . . . . . . . . . 1
Department 
of the                                                                         Chapter  1.  Accelerated Cost 
Treasury                                                                       Recovery System (ACRS)                    . . . . . . 2
Internal    Depreciating                                                       ACRS Defined              . . . . . . . . . . . . . . 2
Revenue                                                                        What Can and Cannot Be 
Service                                                                                    Depreciated Under ACRS . . . . . . 2
            Property Placed                                                    How To Figure the Deduction . . . . . . 3
                                                                               Dispositions . . . . . . . . . . . . . . . . 6
            in Service Before                                                  Chapter  2.  Other Methods of 
                                                                               Depreciation              . . . . . . . . . . . . . . 7
            1987                                                               How To Figure the Deduction . . . . . . 7
                                                                               Methods To Use              . . . . . . . . . . . . . 8
                                                                               How To Change Methods . . . . . . . . 8
                                                                               Dispositions . . . . . . . . . . . . . . . . 9
                                                                               Chapter  3.  Listed Property          . . . . . . . . 9
                                                                               Listed Property Defined             . . . . . . . .   10
                                                                               Predominant Use Test . . . . . . . . .                10
                                                                               Deductions After Recovery 
                                                                                           Period . . . . . . . . . . . . . . . .    12
                                                                               Leased Property             . . . . . . . . . . . .   12
                                                                               What Records Must Be Kept                 . . . . .   12
                                                                               How To Get Tax Help           . . . . . . . . . . .   13
                                                                               Appendix . . . . . . . . . . . . . . . . . . .        15
                                                                               Index       . . . . . . . . . . . . . . . . . . . . . 21

                                                                               Introduction
                                                                               The law allows you to recover your cost in busi
                                                                               ness  or  incomeproducing  property  through 
                                                                               yearly tax deductions. You do this by depreciat
                                                                               ing your property, that is, by deducting some of 
                                                                               your cost on your tax return each year. You can 
                                                                               depreciate  both  tangible  property,  such  as  a 
                                                                               car, building, or machinery, and certain intangi
                                                                               ble property, such as a copyright or a patent.
                                                                               The amount you can deduct depends on:
                                                                               1. How much the property cost,
                                                                               2. When you began using it,
                                                                               3. How long it will take to recover your cost, 
                                                                               and
                                                                               4. Which of several depreciation methods 
                                                                               you use.
                                                                               Depreciation  defined.          Depreciation  is  a  loss 
                                                                               in the value of property over the time the prop
                                                                               erty is being used. Events that can cause prop
                                                                               erty  to  depreciate  include  wear  and  tear,  age, 
                                                                               deterioration,  and  obsolescence.  You  can  get 
                                                                               back  your  cost  of  certain  property,  such  as 
                                                                               equipment you use in your business or property 
                                                                               used for the production of income by taking de
                                                                               ductions for depreciation.
                                                                               Amortization.       Amortization is similar to depre
                                                                               ciation.  Using  amortization,  you  can  recover 
                                                                               your cost or basis in certain property proportion
                                                                               ately over a specific number of years or months. 
              Get forms and other information faster and easier at:            Examples  of  costs  you  can  amortize  are  the 
              • IRS.gov (English)         • IRS.gov/Korean (한국어)               costs of starting a business, reforestation, and 
              • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) 
              • IRS.gov/Chinese (中文)      • IRS.gov/Vietnamese (TiếngViệt) 

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pollution control facilities. You can find informa modified straight line method. The law pre
tion on amortization in chapter 8 of Pub. 535, scribes fixed percentages to be used for each
Business Expenses. class of property.
1.
Alternative minimum tax. If you use acceler Property depreciable under ACRS is called
ated depreciation for real property, or personal recovery property. The recovery class of
property that is leased to others, you may be lia property determines the recovery period. Gen
ble for the alternative minimum tax. Accelerated Accelerated erally, the class life of property places it in a
depreciation is any method that allows recovery 3year, 5year, 10year, 15year, 18year, or
19year recovery class.
at a faster rate in the earlier years than the Cost Recovery
straight line method. For more information, you Under ACRS, the prescribed percentages
may wish to see the following. are used to recover the unadjusted basis of re
Form 6251, Alternative Minimum Tax—In System (ACRS) covery property. To figure a depreciation de
dividuals. duction, you multiply the prescribed percentage
Pub. 542, Corporations. for the recovery class by the unadjusted basis
Topics
Comments and suggestions. We welcome This chapter discusses: of the recovery property.
your comments about this publication and your You must continue to figure your deprecia
suggestions for future editions. The definition of ACRS tion under ACRS for property placed in service
You can send us comments from irs.gov/ What can and cannot be depreciated after 1980 and before 1987. For property you
formspubs. Click on “More Information” and under ACRS placed in service after 1986, you must use
then on “Give us feedback.” How to figure the deduction MACRS, discussed in chapter 4 of Pub. 946.
Or you can write to: Dispositions

Internal Revenue Service Useful Items What Can and Cannot Be
Tax Forms and Publications You may want to see:
1111 Constitution Ave. NW, IR6526 Depreciated Under
Washington, DC 20224 Publication ACRS
We respond to many letters by telephone. 544 Sales and Other Dispositions of ACRS applies to most depreciable tangible
Therefore, it would be helpful if you would in Assets property placed in service after 1980 and before
clude your daytime phone number, including 551 Basis of Assets 1987. It includes new or used and real or per
the area code, in your correspondence. sonal property. The property must be for use in
Although we cannot respond individually to 583 Starting a Business and Keeping a trade or business or for the production of in
each comment received, we do appreciate your Records come. Property you acquired before 1981 or af
ter 1986 is not ACRS recovery property. For in
feedback and will consider your comments as Form (and Instructions) formation on depreciating property acquired
we revise our tax products.
3115 Application for Change in before 1981, see chapter 2. For information on
Ordering forms and publications. Visit Accounting Method depreciating property acquired after 1986, see
irs.gov/formspubs to download forms and publi chapter 4 of Pub. 946.
cations. Otherwise, you can go to irs.gov/ 4562 Depreciation and Amortization
orderforms to order current and prioryear forms
and instructions. Your order should arrive within ACRS applies to property first used before Recovery Property
10 business days. 1987. It is the name given to tax rules for getting
back (recovering) through depreciation deduc Recovery property under ACRS is tangible de
Tax questions. If you have a tax question tions the cost of property used in a trade or preciable property placed in service after 1980
not answered by this publication, check business or to produce income. These rules are and before 1987. It generally includes new or
IRS.gov and How To Get Tax Help at the end of mandatory and generally apply to tangible prop used property that you acquired after 1980 and
this publication. erty placed in service after 1980 and before before 1987 for use in your trade or business or
1987. If you placed property in service during for the production of income.
this period, you must continue to figure your de
How To Use This preciation under ACRS.
Nonrecovery Property
Publication If you used listed property placed in service af
ter June 18, 1984, less than 50% for business You cannot use ACRS for property you placed
This publication describes the kinds of property during the year, see Predominant Use Test in in service before 1981 or after 1986. Nonrecov
that can be depreciated and the methods used chapter 3. Listed property includes cars, other ery property also includes:
to figure depreciation on property placed in means of transportation, and certain comput 1. Intangible property,
service before 1987. It is divided into three ers.
2. Property you elected to exclude from
chapters and contains an appendix. Any additions or improvements placed in serv ACRS that is properly depreciated under a
Chapter 1 explains the rules for depreciat ice after 1986, including any components of a method of depreciation that is not based
ing property under the Accelerated Cost building (such as plumbing, wiring, storm win on a term of years,
Recovery System (ACRS). dows, etc.), are depreciated using MACRS, dis
Chapter 2 explains the rules for depreciat cussed in chapter 4 of Pub. 946. It does not 3. Certain public utility property, and
ing property first used before 1981. matter that the underlying property is depreci 4. Certain property acquired and excluded
ated under ACRS or one of the other methods.
Chapter 3 explains the rules for listed prop from ACRS because of the antichurning
erty. Also, this chapter defines listed prop rules.
erty.
ACRS Defined Intangible property. Intangible property is
The appendix contains the ACRS Percent not depreciated under ACRS.
age Tables. ACRS consists of accelerated depreciation
methods and an alternate ACRS method that Property depreciated under methods not
could have been elected. The alternate ACRS expressed in a term of years. Certain prop
method used a recovery percentage based on a erty depreciated under a method not expressed
Page 2 Chapter 1 Accelerated Cost Recovery System (ACRS)

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in a term of years is not depreciated under Classes of Recovery The ACRS percentages for 10year recov
ACRS. This included any property: ery property are:
Property
1. If you made an irrevocable election to ex
clude such property; and All recovery property under ACRS is in one of Recovery Period Percentage
2. In the first year that you could have the following classes. The class for your prop 1st year . . . . . . . . . . . . . . . . . . . 8%
claimed depreciation, you properly used erty was determined when you began to depre 2nd year . . . . . . . . . . . . . . . . . . . 14%
the unitofproduction method or any ciate it. 3rd year . . . . . . . . . . . . . . . . . . . 12%
method of depreciation not expressed in a 4th through 6th year . . . . . . . . . . . 10%
term of years (not including the retire 3Year Property 7th through 10th year . . . . . . . . . . 9%
mentreplacementbetterment method).
3year property includes automobiles, lightduty If you used the percentages above, you can
Public utility property. Public utility property trucks (actual unloaded weight less than 13,000 not claim depreciation for this property after
for which the taxpayer does not use a normali pounds), and tractor units for use overtheroad. 1995.
zation method of accounting is excluded from Race horses over 2 years old when placed in
ACRS and is subject to depreciation under a service are 3year property. Any other horses Example. On April 21, 1986, you bought
special rule. over 12 years old when you placed them in and placed in service a new mobile home for
service are also included in the 3year property $26,000 to be used as rental property. You paid
Additions or improvements to ACRS prop class. $10,000 cash and signed a note for $16,000
erty after 1986. Any additions or improve giving you an unadjusted basis of $26,000. On
ments placed in service after 1986, including The ACRS percentages for 3year recovery June 8, 1986, you bought and placed in service
any components of a building (plumbing, wiring, property are: a used mobile home for use as rental property
storm windows, etc.) are depreciated using at a total cost of $11,500. The total unadjusted
MACRS, discussed in chapter 4 of Pub. 946. It basis of your 10year recovery property placed
does not matter that the underlying property is Recovery Period Percentage in service in 1986 was $37,500 ($26,000 +
depreciated under ACRS or one of the other 1st year . . . . . . . . . . . . . . . . . . . 25% $11,500). Your ACRS deduction was $3,000
methods. 2nd year . . . . . . . . . . . . . . . . . . . 38% (8% × $37,500). In 1987, your ACRS deduction
3rd year . . . . . . . . . . . . . . . . . . . 37% was $5,250 (14% × $37,500). In 1988, your
ACRS deduction was $4,500 (12% × $37,500).
How To Figure the If you used the percentages above to depre In 1989, 1990, and 1991, your ACRS deduction
ciate your 3year recovery property, your prop was $3,750 (10% × $37,500). In 1992, 1993,
Deduction erty, except for certain passenger automobiles, 1994, and 1995 your deduction for each year is
is fully depreciated. You cannot claim deprecia $3,375 (9% × $37,500).
After you determine that your property can be tion for this property after 1988.
depreciated under ACRS, you are ready to fig 15Year Real Property
ure your deduction. Because the conventions
are built into the percentage table rates, you 5Year Property
15year real property is real property that is re
only need to know the following. covery property placed in service before March
5year property includes computers, copiers,
1. The unadjusted basis of your recovery and equipment, such as office furniture and fix 16, 1984. It includes all real property, such as
property. tures. It also includes single purpose agricul buildings, other than that designated as 5year
2. The classes of recovery property. tural or horticultural structures and petroleum or 10year property.
storage facilities (other than buildings and their
3. The recovery periods. structural components). Unlike the 3, 5, or 10year classes of prop
erty, the percentages for 15year real property
4. Whether to use the prescribed percen depend on when you placed the property in
tages based on accelerated methods or The ACRS percentages for 5year recovery
percentages based on using the alternate property are: service during your tax year. You could group
15year real property by month and year placed
ACRS method. in service.
Recovery Period Percentage
Unadjusted Basis 1st year . . . . . . . . . . . . . . . . . . . 15% In Table 1, at the end of this publication in
2nd year . . . . . . . . . . . . . . . . . . . 22% the Appendix, find the month in your tax year
To figure your ACRS deduction, you multiply 3rd through 5th year . . . . . . . . . . . 21% that you placed the property in service in your
the unadjusted basis in your recovery property trade or business or for the production of in
come. You use the percentages listed under
by its applicable percentage for the year. Unad If you used the percentages above to depre that month for each year of the recovery period
justed basis is the same amount you would use ciate your 5year recovery property, it is fully to determine your depreciation deduction each
to figure gain on a sale, but it is figured without depreciated. You cannot claim depreciation for year.
taking into account any depreciation taken in this property after 1990.
earlier years. However, reduce your original ba
sis by the amount of amortization taken on the Example. On March 5, 1984, you placed
property and by any section 179 deduction 10Year Property an apartment building in service in your busi
claimed as discussed in chapter 2 of Pub. 946. ness. It is 15year real property. After subtract
10year property includes certain real property ing the value of the land, your unadjusted basis
If you buy property, your unadjusted basis is such as themepark structures and certain pub in the building is $250,000. You use the calen
usually its cost minus any amortized amount lic utility property. Manufactured homes (includ dar year as your tax year. March is the third
and minus any section 179 deduction elected. If ing mobile homes) and railroad tank cars are month of your tax year. Your ACRS deduction
you acquire property in some other way, such also 10year property. for 1984 was $25,000 (10% × $250,000). For
as by inheriting it, getting it as a gift, or building 1985, the percentage for the third month of the
it yourself, you figure your unadjusted basis un You do not treat a building, and its structural second year of the recovery period is 11%.
der other rules. See Pub. 551. components, as 10year property by reason of Your deduction was $27,500 (11% × $250,000).
a change in use after you placed the property in For the third, fourth, and fifth years of the recov
service. For example, a building (15year real ery period (1986, 1987, and 1988), the percen
property) that was placed in service in 1981 and tages are 9%, 8%, and 7%. For 1989 through
was converted to a themepark structure in 1992, the percentage for the third month is 6%.
1986 remains 15year real property. Your deduction each year is $15,000 (6% ×
Chapter 1 Accelerated Cost Recovery System (ACRS) Page 3

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$250,000). For 1993, 1994, and 1995, the per
centage for the third month is 5%. Your depreci Year Rate Deduction Year Rate Deduction
ation deduction is $12,500 (5% × $250,000) for 1986 8.9% $5,251 1985 7.0% $6,650
1993, 1994, and 1995. 1987 12.1% 7,139 1986 9.0% 8,550
1988 10.5% 6,195 1987 8.0% 7,600
LowIncome Housing 1989 9.1% 5,369 1988 7.0% 6,650
1990 7.9% 4,661 1989 7.0% 6,650
Lowincome housing that was assigned a 1991 6.9% 4,071 1990 6.0% 5,700
15year recovery period under ACRS includes 1992 5.9% 3,481 1991 5.0% 4,750
the following types of property. 1993 5.2% 3,068 1992 5.0% 4,750
1. Federally assisted housing projects where 1994 4.6% 2,714 1993 5.0% 4,750
the mortgage is insured under section 1995 4.6% 2,714 1994 5.0% 4,750
221(d)(3) or 236 of the National Housing 1996 4.6% 2,714 1995 5.0% 4,750
Act, or housing financed or assisted by di 1997 4.6% 2,714 1996 5.0% 4,750
rect loan or tax abatement under similar 1998 4.6% 2,714 1997 5.0% 4,750
provisions of state or local laws. 1999 4.5% 2,655 1998 4.0% 3,800
2. Lowincome rental housing for which a de 2000 4.5% 2,655 1999 4.0% 3,800
preciation deduction for rehabilitation ex 2001 1.5% 885 2000 4.0% 3,800
penditures is allowed. 2001 4.0% 3,800
2002 4.0% 3,800
3. Lowincome rental housing held for occu 18Year Real Property 2003 1.0% 950
pancy by families or individuals eligible to
receive subsidies under section 8 of the 18year real property is real property that is re
United States Housing Act of 1937, as covery property placed in service after March 19Year Real Property
amended, or under the provisions of state 15, 1984, and before May 9, 1985. It includes
or local laws that authorize similar subsi real property, such as buildings, other than that 19year real property is real property that is re
dies for lowincome families. designated as 5year, 10year, 15year real covery property placed in service after May 8,
4. Housing financed or assisted by direct property, or lowincome housing. 1985, and before 1987. It includes all real prop
loan or insured under Title V of the Hous erty, other than that designated as 5year,
ing Act of 1949. The ACRS percentages for 18year real 10year, 15year, or 18year real property, or
property depend on when you placed the prop lowincome housing.
The ACRS percentages for lowincome erty in service in your trade or business or for
housing real property, like the regular 15year the production of income during your tax year.
real property percentages, depend on when There are also tables for 18year real property The ACRS percentages for 19year real
you placed the property in service. In Table 2 or in the Appendix. Table 4 shows the percen property depend on when you placed the prop
3 at the end of this publication in the Appendix, tages for 18year real property you placed in erty in service in a trade or business or for the
find the month in your tax year that you first service after June 22, 1984, and before May 9, production of income during your tax year. Ta
placed the property in service as rental housing. 1985. Table 5 is for 18year real property ble 6 shows the percentages for 19year real
Use the percentages listed under that month for placed in service after March 15, 1984, and be property.
each year of the recovery period. Table 2 fore June 23, 1984.
shows percentages for lowincome housing You find the month in your tax year that you
placed in service before May 9, 1985. Table 3 Find the month in your tax year that you placed the property in service. You use the per
shows percentages for lowincome housing placed the property in service in a trade or busi centages listed under that month for each year
placed in service after May 8, 1985, and before ness or for the production of income. Use the of the recovery period.
1987. percentages listed under that month for each
year of the recovery period. Recovery Periods
Example. In May 1986, you acquired and
placed in service a house that qualified as Example. On April 28, 1985, you bought
lowincome rental housing under item (3) of the and placed in service a rental house. The Each item of recovery property is assigned to a
above listing. You use the calendar year as your house, not including the land, cost $95,000. class of property. The classes of recovery prop
tax year. You use Table 3 because the property This is your unadjusted basis for the house. You erty establish the recovery periods over which
was placed in service after May 8, 1985. Your use the calendar year as your tax year. Be the unadjusted basis of items in a class is re
unadjusted basis for the property, not including cause the house was placed in service after covered. The classes of property are:
the land, was $59,000. June 22, 1984, and before May 9, 1985, it is 3Year property,
Your deduction for 1986 through 2001 is 18year real property. You use Table 4 to figure 5Year property,
shown in the following table. your deduction for the house. April is the fourth
month of your tax year. Your deduction for 1985 10Year property,
through 2003 is shown in the following table. 15Year real property,
Lowincome housing,
18Year real property, and
19Year real property.

Alternate ACRS Method
(Modified Straight Line
Method)

ACRS provides an alternate ACRS method that
could be elected. This alternate ACRS method
uses a recovery percentage based on a modi
fied straight line method.

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This alternate ACRS method generally uses The saw is fully depreciated after 1998.
percentages other than those from the tables. If Lightduty truck
you elected the alternate ACRS method, you 5 years straight line = 20% 15year real property. Under ACRS, you
determine the recovery period by using the fol 20% × $13,000 = $2,600 could also elect to use the alternate ACRS
lowing schedule. This schedule is for other than Halfyear convention of $2,600 = $1,300.0012 method for 15year real property. The alternate
18 and 19year real property and lowincome ACRS method allows you to depreciate your
housing: Electric saw 15year real property using the straight line
ACRS method over the alternate recovery peri
12 years straight line = 8.333% ods of 15, 35, or 45 years. If you selected a
You could have elected 8.333% × $500 = $41.67 15year recovery period, you use the percent
In the case of: a recovery period of: Halfyear convention of $41.67 =12 20.84 age (6.667%) from the schedule above. You
3year property . . . . . . . . . 3, 5, or 12 years Total ACRS deduction for 1986 $1,320.84 prorate this percentage for the number of
5year property . . . . . . . . . 5, 12, or 25 years months the property was in service in the first
10year property . . . . . . . . 10, 25, or 35 years year. If you selected a 35 or 45year recovery
15year real property . . . . 15, 35, or 45 years You take a full year of depreciation for both period, you use either Table 11 or 15.
the truck and the saw for the years 1987
through 1990. Your ACRS deduction for each of Alternate periods for 18year real property.
Percentages. The straightline percentages those years is as follows: For 18year real property, the alternate recovery
for the alternate ACRS method are: periods are 18, 35, or 45 years. The percen
Lightduty truck tages for 18year real property under the alter
nate method are in Tables 7, 8, 10, 11, 14, and
Recovery Period Percentage 5 years straight line = 20% 15 in the Appendix. There are two tables for
5 years . . . . . . . . . . . . . . . . . . 20.00% 20% × $13,000 = $2,600 each alternate recovery period. One table
shows the percentage for property placed in
10 years . . . . . . . . . . . . . . . . . . 10.00% Electric saw service after June 22, 1984. The other table has
12 years . . . . . . . . . . . . . . . . . . 8.333%
15 years . . . . . . . . . . . . . . . . . . 6.667% 12 years straight line = 8.333% the percentages for property placed in service
25 years . . . . . . . . . . . . . . . . . . 4.00% 8.333% × $500 = $41.67 after March 15, 1984, and before June 23,
35 years . . . . . . . . . . . . . . . . . . 2.857% Total annual ACRS deduction for $2,641.67 1984.
1987 through 1990
You apply the percentage to the unadjusted Alternate periods for 19year real property.
For 19year real property, the alternate recovery
basis (defined earlier) of the property to figure In 1991, you take a halfyear of depreciation periods are 19, 35, or 45 years. If you selected
your ACRS deduction. There are tables for 18 for the truck and a full year of depreciation for a 19year recovery period, use Table 9 to deter
and 19year real property later in this publica the saw. Your ACRS deduction for 1991 is as mine your deduction. If you select a 35 or
tion in the Appendix. For 15year real property, follows: 45year recovery period, use either Table 13 or
see 15-year real property, later.
14.
3, 5, and 10year property. If you elected to Lightduty truck
use an alternate recovery percentage, you have Example. You placed in service an apart
to use the same recovery percentage for all 5 years straight line = 20% ment building on August 3, 1986. The building
property in that class that you placed in service 20% × $13,000 = $2,600 is 19year real property. The sales contract allo
in that tax year. This applies throughout the re Halfyear convention of $2,600 = $1,300.0012 cated $300,000 to the building and $100,000 to
covery period you selected. the land. You use the calendar year as your tax
Electric saw year. You chose the alternate ACRS method
Half-year convention. If you elected the over a recovery period of 35 years. For 1986,
alternate method, only a halfyear of deprecia 12 years straight line = 8.333% you figure your ACRS deduction using Ta
tion was deducted for the year you placed the 8.333% × $500 = $41.67
ble 13. August is the eighth month of your tax
property in service. This applied regardless of Total ACRS deduction for 1991 $1,341.67 year. The percentage from Table 13 for the
when in the tax year you placed the property in eighth month is 1.1%. Your deduction was
service. For each of the remaining years in the $3,300 ($300,000 × 1.1%). The deduction rate
recovery period, you take a full year's deduc The truck is fully depreciated after 1991. from ACRS Table 13 for years 2 through 20 is
tion. If you hold the property for the entire recov You take a full year of depreciation for the saw 2.9% so that your deduction in 1987 through
ery period, a halfyear of depreciation is allowa for the years 1992 through 1997. Your ACRS 2005 is $8,700 ($300,000 × 2.9%).
ble for the year following the end of the recovery deduction for each of those years is as follows:
period. Alternate periods for lowincome housing.
Electric saw For lowincome housing, the alternate recovery
Example. You operate a small upholstery periods are 15, 35, or 45 years. If you selected
business. On March 19, 1986, you bought and 12 years straight line = 8.333% a 15year period for this property, use 6.667%
placed in service a $13,000 lightduty panel 8.333% × $500 = $41.67
as the percentage. If you selected a 35 or
truck to be used in your business and a $500 Total annual ACRS deduction for $41.67 45year period, use either Table 11, 12, or 15.
electric saw. You elected to use the alternate 1992 through 1997
ACRS method. You did not elect to take a sec Election. You had to make the election to use
tion 179 deduction. You decided to recover the You take a halfyear of depreciation for the the alternate ACRS method by the return due
cost of the truck, which is 3year recovery prop saw for 1998. Your ACRS deduction for 1998 is date (including extensions) for the tax year you
erty, over 5 years. The saw is 5year property, as follows: placed the property in service.
but you decided to recover its cost over 12
years. Revocation of election. Your election to use
For 1986, your ACRS deduction reflected Electric saw an alternate ACRS method, once made, can be
the halfyear convention. In the first year, you 12 years straight line = 8.333% changed only with the consent of the Commis
deducted half of the amount determined for a 8.333% × $500 = 41.67 sioner. The Commissioner grants consent only
full year. Your ACRS deduction for 1986 is as Halfyear convention of $41.67 = 12 20.84 in extraordinary circumstances. Any request for
follows: a revocation will be considered a request for a
Total ACRS deduction for 1998 $20.84 ruling.

Chapter 1 Accelerated Cost Recovery System (ACRS) Page 5

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ACRS Deduction in Short Generally, you get no ACRS deduction for the month. Count the month of disposition as half a
tax year in which you dispose of or retire recov month of use.
Tax Year ery property, except for 15, 18, and 19year
real property. This means there is no deprecia Example. You purchased and placed in
For a tax year that is less than 12 months, the tion deduction under ACRS in the year you dis service a rental house on July 2, 1984, for
ACRS deduction is prorated on a 12month ba pose of or retire any of your 3, 5, or 10year $100,000 (not including the cost of land). You
sis. Figure the amount of the ACRS deduction recovery property. file your return based on a calendar year. Your
for a short tax year as follows. rate from Table 4 for the seventh month is 4%.
1. First, you figure the ACRS deduction for a Dispositions — mass asset accounts. You figured your ACRS deduction for 1984 was
full year. You figure this by multiplying the The law provides a special rule to avoid the cal $4,000 ($100,000 × 4%). In 1985 through 1994,
unadjusted basis by the recovery percent culation of gain on the disposition of assets your ACRS deductions were 9%, 8%, 8%, 7%,
age. from mass asset accounts. A mass asset ac 6%, 6%, 5%, 5%, and 5% × $100,000. You sell
count includes items usually minor in value in the house on September 24, 1995. Figure your
2. You then multiply the ACRS deduction de relation to the group, numerous in quantity, im ACRS deduction for 1995 for the months of use.
termined for a full tax year by a fraction. practical to separately identify, and not usually The full ACRS deduction for 1995 is $5,000
accounted for on a separate basis, but on a to ($100,000 × 5%). Prorate this amount for the
The numerator (top number) of the fraction is tal dollar value. Examples of mass assets in 8.5 months in 1995 that you held the property.
the number of months in the short tax year and clude minor items of office, plant, and store fur Under the midmonth convention, you count
the denominator (bottom number) is 12. For ex niture and fixtures. September as half a month. Your ACRS deduc
ample, a corporation placed in service in June Under the special rule, if you elected to use tion for 1995 is $3,542 ($5,000 × 8.5/12).
1986 an item of 3year property with an unad a mass asset account, you recognize gain to
justed basis of $10,000. The corporation files a the extent of the proceeds from the disposition
tax return, because of a change in its account of the asset. You leave the unadjusted basis of Depreciation Recapture
ing period, for the 6month short tax year end the property in the account until recovered in fu
ing June 30, 1986. The full year's ACRS deduc ture years. If you did this, include the total pro If you dispose of property depreciated under
tion for this item is $2,500 ($10,000 × 25%), the ceeds realized from the disposition in income ACRS that is section 1245 recovery property,
first year percentage from the 3year table. The on the tax return for the year of disposition. you will generally recognize gain or loss. Gain
ACRS deduction for the short tax year is $1,250 recognized on a disposition is ordinary income
($2,500 × 6/12). Early dispositions — 15-year real prop- to the extent of prior depreciation deductions
erty. If you dispose of 15year real property, taken. This recapture rule applies to all personal
You use the full ACRS percentages during you base your ACRS deduction for the year of property in the 3year, 5year, and 10year
the remaining years of the recovery period. For disposition on the number of months in use. classes. You recapture gain on manufactured
the first tax year after the recovery period, the You use a full-month convention. For a dispo homes and theme park structures in the 10year
unrecovered basis will be deductible. sition at any time during a particular month be class as section 1245 property. Section 1245
fore the end of the recovery period, no deduc property generally includes all personal prop
Exception. For the tax year in which you tion is allowed for the month of disposition. This erty. See Section 1245 property in chapter 3 of
placed 15, 18, or 19year real property in serv applies whether you use the regular ACRS Pub. 544 for more information.
ice or in the tax year you dispose of it, you com method or elected the alternate ACRS method.
pute the ACRS deduction for the number of You treat dispositions of section 1250 real
months that the property is in service during Example. You purchased and placed in property on which you have a gain as section
that tax year. You compute the number of service a rental house on March 2, 1984, for 1245 recovery property. You recognize gain on
months using either a fullmonth or midmonth $98,000 (not including the cost of land). You file this property as ordinary income to the extent of
convention. This is true regardless of the num your return based on a calendar year. Your rate prior depreciation deductions taken. Section
ber of months in the tax year and the recovery from Table 1 for the third month is 10%. Your 1250 property includes most real property. See
period and method used. ACRS deduction for 1984 was $9,800 ($98,000 Section 1250 property in chapter 3 of Pub. 544
× 10%). For 1985 through 1988, you figured for more information. This rule applies to all
your ACRS deductions using 11%, 9%, 8%, section 1250 real property except the following
Dispositions and 7% × $98,000. For 1989 through 1992, you property.
figured your ACRS deductions using 6% for 1. Any 15, 18, or 19year real property that
A disposition is the permanent withdrawal of each year. The deduction each year was is residential rental property.
property from use in your trade or business or in $98,000 × 6%. For 1993 and 1994, the ACRS
the production of income. You can make a with deduction is ($98,000 × 5%) $4,900 for each 2. Any 15, 18, or 19year real property that
drawal by sale, exchange, retirement, abandon year. You sell the house on June 1, 1995. you elected to depreciate using the alter
ment, or destruction. You figure your ACRS deduction for 1995 nate ACRS method.
for the full year and then prorate that amount for 3. Any 15, 18, or 19year real property that
You generally recognize gain or loss on the the months of use. The full ACRS deduction for is subsidized lowincome housing.
disposition of an asset by sale. However, non 1995 is $4,900 ($98,000 × 5%). You then pro
recognition rules can allow you to postpone rate this amount to the 5 months in 1995 during For these recapture rules, you treat the section
some gain. See Pub. 544. which it was rented. Your ACRS deduction for 179 deduction and 50% of the investment credit
If you physically abandon property, you can 1995 is $2,042 ($4,900 × 5/12). that reduced your basis as depreciation.
deduct as a loss the adjusted basis of the asset Early dispositions — 18- and 19-year See Pub. 544 for further discussion of dispo
at the time of its abandonment. Your intent must real property. If you dispose of 18 or 19year sitions of section 1245 and 1250 property.
be to discard the asset so that you will not use it real property, you base your ACRS deduction
again or retrieve it for sale, exchange, or other for the year of disposition on the number of
disposition. months in use. For 18year property placed in
service before June 23, 1984, use a fullmonth
Early dispositions. The disposal of an asset convention on a disposition. For 18year prop
before the end of its specified recovery period is erty placed in service after June 22, 1984, and
referred to as an early disposition. When an for 19year property, determine the number of
early disposition occurs, the depreciation de months in use by using the midmonth conven
duction in the year of disposition depends on tion. Under the mid-month convention, treat
the class of property involved. real property disposed of any time during a
Early dispositions of ACRS property month as disposed of in the middle of that
other than 15-, 18-, or 19-year real property.
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Note. The cost of certain intangible prop Pub. 551 explains how to figure basis for
erty that you acquire after August 10, 1993, property acquired in different ways. It also dis
must be amortized over a 15year period. For cusses what items increase and decrease ba
2. more information, see chapter 8 of Pub. 535. sis, how to figure adjusted basis, and how to al
locate cost if you buy several pieces of property
Public utility property. The law excludes at one time.
from MACRS any public utility property for
Other Methods which the taxpayer does not use a normaliza
tion method of accounting. This type of property Useful Life
of Depreciation is subject to depreciation under a special rule.
The useful life of a piece of property is an esti
Videocassettes. If you are in the videocas mate of how long you can expect to use it in
Topics sette rental business, you can depreciate those your trade or business, or to produce income. It
This chapter discusses: videocassettes purchased for rental. You can is the length of time over which you will make
depreciate the cost less salvage value of those yearly depreciation deductions of your basis in
How to figure the deduction videocassettes that have a useful life over one the property. It is how long it will continue to be
Methods to use year using either: useful to you, not how long the property will last.
How to change methods The straight line method, or
Dispositions The income forecast method. Many things affect the useful life of property,
such as:
The straight line method, salvage value, and
Useful Items useful life are discussed later under Methods 1. Frequency of use,
You may want to see: To Use. You can deduct in the year of purchase 2. Age when acquired,
as a business expense the cost of any cassette
Publication that has a useful life of one year or less. 3. Your repair policy, and
4. Environmental conditions.
544 Sales and Other Dispositions of
Assets How To Figure the The useful life can also be affected by tech
nological improvements, progress in the arts,
551 Basis of Assets Deduction reasonably foreseeable economic changes,
583 Starting a Business and Keeping shifting of business centers, prohibitory laws,
Records Two other reasonable methods can be used to and other causes. Consider all these factors be
figure your deduction for property not covered fore you arrive at a useful life for your property.
946 How To Depreciate Property under ACRS or MACRS. These methods are
straight line and declining balance. The useful life of the same type of property
Form (and Instructions) varies from user to user. When you determine
To figure depreciation using these methods, the useful life of your property, keep in mind
3115 Application for Change in you must generally determine three things your own experience with similar property. You
Accounting Method about the property you intend to depreciate. can use the general experience of the industry
4562 Depreciation and Amortization They are: you are in until you are able to determine a use
Schedule C (Form 1040) Profit or Loss 1. The basis, ful life of your property from your own experi
ence.
From Business 2. The useful life, and
If your property is being depreciated under 3. The estimated salvage value at the end of Change in useful life. You base your estimate
ACRS, you must continue to use rules for de its useful life. of useful life on certain facts. If these facts
preciation that applied when you placed the change significantly, you can adjust your esti
property in service. If your property qualified for The amount of the deduction in any year also mate of the remaining useful life. However, you
MACRS, you must depreciate it under MACRS. depends on which method of depreciation you redetermine the estimated useful life only when
See Pub. 946. choose. the change is substantial and there is a clear
reason for making the change.
However, you cannot use MACRS for certain Basis
property because of special rules that exclude it
Salvage Value
from MACRS. Also, you can elect to exclude To deduct the proper amount of depreciation
certain property from being depreciated under each year, first determine your basis in the
MACRS. Property that you cannot depreciate property you intend to depreciate. The basis It is important for you to accurately determine
using MACRS includes: used for figuring depreciation is the same as the the correct salvage value of the property you
1. Intangible property, basis that would be used for figuring the gain on want to depreciate. You generally cannot de
a sale. Your original basis is usually the pur preciate property below a reasonable salvage
2. Property you can elect to exclude from chase price. However, if you acquire property in value.
MACRS that you properly depreciate un some other way, such as inheriting it, getting it Determining salvage value. Salvage value is
der a method that is not based on a term as a gift, or building it yourself, you have to fig the estimated value of property at the end of its
of years, ure your original basis in a different way. useful life. It is what you expect to get for the
3. Certain public utility property, property if you sell it after you can no longer use
Adjusted basis. Events will often change the
4. Any motion picture film or video tape, basis of property. When this occurs, the it productively. You must estimate the salvage
5. Any sound recording, and changed basis is called the adjusted basis. value of a piece of property when you first ac
Some events, such as improvements you quire it.
6. Certain real and personal property placed make, increase basis. Events such as deduct Salvage value is affected both by how you
in service before 1987. ing casualty losses and depreciation decrease use the property and how long you use it. If it is
basis. If basis is adjusted, the depreciation de your policy to dispose of property that is still in
Intangible property. You cannot depreciate duction may also have to be changed, depend good operating condition, the salvage value can
intangible property under ACRS or MACRS. ing on the reason for the adjustment and the be relatively large. However, if your policy is to
You depreciate intangible property using any method of depreciation you are using. use property until it is no longer usable, its sal
other reasonable method, usually, the straight vage value can be its junk value.
line method.
Chapter 2 Other Methods of Depreciation Page 7

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Changing salvage value. Once you deter using a 10year useful life and no salvage Income Forecast Method
mine the salvage value for property, you should value. He takes the $5,600 basis and divides
not change it merely because prices have that amount by 10 years ($5,600 ÷ 10 = $560, a The income forecast method requires income
changed. However, if you redetermine the use full year's use). He must prorate the $560 for his projections for each videocassette or group of
ful life of property, as discussed earlier under 9 months of use in 1994. This gives him a de videocassettes. You can group the videocas
Change in useful life, you can also redetermine duction of $420 ($560 × 9/12). In 1995, Frank settes by title for making this projection. You de
the salvage value. When you redetermine the can deduct $560 for the full year. termine the depreciation by applying a fraction
salvage value, take into account the facts that to the cost less salvage value of the cassette.
exist at the time. The numerator is the income from the videocas
Declining Balance Method
sette for the tax year and the denominator is the
Net salvage. Net salvage is the salvage value total projected income for the cassette. For
of property minus what it costs to remove it The declining balance method allows you to re
when you dispose of it. You can choose either cover a larger amount of the cost of the property more information on the income forecast
salvage value or net salvage when you figure in the early years of your use of the property. method, see Revenue Ruling 60358 in Cumu
depreciation. You must consistently use the one The rate cannot be more than twice the straight lative Bulletin 1960, Volume 2, on page 68.
you choose and the treatment of the costs of re line rate.
moval must be consistent with the practice Rate of depreciation. Under this method, you How To Change
adopted. However, if the cost to remove the must determine your declining balance rate of
property is more than the estimated salvage depreciation. The initial step is to: Methods
value, then net salvage is zero. Your salvage
value can never be less than zero. 1. Divide the number 1 by the useful life of In some cases, you may change your method of
your property to get a straight line rate. depreciation for property depreciated under a
10% rule. If you acquire personal property that (For example, if property has a useful life reasonable method. If you change your method
has a useful life of 3 years or more, you can use of 5 years, its normal straight line rate of of depreciation, it is generally a change in your
an amount for salvage value that is less than depreciation is , or 20%.)15 method of accounting. You must get IRS con
your actual estimate. You can subtract from sent before making the change. However, you
your estimate of salvage value an amount equal 2. Multiply this straight line rate by a number
to 10% of your basis in the property. If salvage that is more than 1 but not more than 2 to do not need permission for certain changes in
value is less than 10% of basis, you can ignore determine the declining balance rate. your method of depreciation. The rules dis
cussed in this section do not apply to property
salvage value when you figure depreciation. Unless there is a change in the useful life during depreciated under ACRS or MACRS.
the time you depreciate the property, the rate of
depreciation generally will not change. For information on ACRS elections, see
Methods To Use Revocation of election in chapter 1 under Alter-
Depreciation deductions. After you deter nate ACRS Method.
Two methods of depreciation are the straight mine the rate of depreciation, multiply the ad
line and declining balance methods. If ACRS or justed basis of the property by it. This gives you Change to the straight line method. You can
MACRS does not apply, you can use one of the amount of your deduction. For example, if change from the declining balance method to
these methods. The straight line and declining your adjusted basis at the beginning of the first the straight line method at any time during the
balance methods discussed in this section are year is $10,000, and your declining balance useful life of your property without IRS consent.
not figured in the same way as straight line or rate is 20%, your depreciation deduction for the However, if you have a written agreement with
declining balance methods under MACRS. first year is $2,000 ($10,000 × 20%). To figure the IRS that prohibits a change, you must first
your depreciation deduction in the second year, get IRS permission. When the change is made,
you must first adjust the basis for the amount of figure depreciation based on your adjusted ba
Straight Line Method depreciation you deducted in the first year. Sub sis in the property at that time. Your adjusted
tract the previous year's depreciation from your basis takes into account all previous deprecia
Before 1981, you could use any reasonable basis ($10,000 − $2,000 = $8,000). Multiply this tion deductions. Use the estimated remaining
method for every kind of depreciable property. amount by the rate of depreciation ($8,000 × useful life of your property at the time of change
One of these methods was the straight line 20% = $1,600). Your depreciation deduction for and its estimated salvage value.
method. This method was also used for intangi the second year is $1,600. You can change from the declining balance
ble property. It lets you deduct the same As you can see from this example, your ad method to straight line only on the original tax
amount of depreciation each year. justed basis in the property gets smaller each return for the year you first use the straight line
To figure your deduction, determine the ad year. Also, under this method, deductions are method. You cannot make the change on an
justed basis of your property, its salvage value, larger in the earlier years and smaller in the amended return filed after the due date of the
and its estimated useful life. Subtract the sal later years. You can make a change to the original return (including extensions).
vage value, if any, from the adjusted basis. The straight line method without consent. When you make the change, attach a state
balance is the total amount of depreciation you ment to your tax return showing:
can take over the useful life of the property. Salvage value. Do not subtract salvage value 1. When you acquired the property,
when you figure your yearly depreciation de
Divide the balance by the number of years ductions under the declining balance method. 2. Its original cost or other original basis,
remaining in the useful life. This gives you the However, you cannot depreciate the property 3. The total amount claimed for depreciation
amount of your yearly depreciation deduction. below its reasonable salvage value. Determine and other allowances since you acquired
Unless there is a big change in adjusted basis, salvage value using the rules discussed earlier, it,
or useful life, this amount will stay the same including the special 10% rule.
throughout the time you depreciate the prop 4. Its salvage value and remaining useful life,
erty. If, in the first year, you use the property for Example. If your adjusted basis has been and
less than a full year, you must prorate your de decreased to $1,000 and the rate of deprecia 5. A description of the property and its use.
preciation deduction for the number of months tion is 20%, your depreciation deduction should
in use. be $200. But if your estimate of salvage value After you change to straight line, you cannot
was $900, you can only deduct $100. This is change back to the declining balance method
Example. In April 1994, Frank bought a because $100 is the amount that would lower or to any other method for a period of 10 years
franchise for $5,600. It expires in 10 years. This your adjusted basis to equal salvage value. without written permission from the IRS.
property is intangible property that cannot be
depreciated under MACRS. Frank depreciates Changes that require permission. For most
the franchise under the straight line method, other changes in method of depreciation, you
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must get permission from the IRS. To request a because of a reason you did not consider when discard the property so that you will not use it
change in method of depreciation, file Form you originally estimated the useful life of the again or retrieve it for sale, exchange, or other
3115. File the application within the first 180 property. disposition.
days of the tax year the change is to become ef
fective. See the Instructions for Form 3115 for Abnormal retirement. A retirement can be ab Basis of property retired. The basis for figur
more information. normal if you withdraw the property early or un ing gain or loss on the retirement of property is
der other circumstances. For example, if the its adjusted basis at the time of retirement, as
Changes granted automatically. The IRS property is damaged by a fire or suddenly be determined in the following discussions.
automatically approves certain changes of a comes obsolete and is now useless.
method of depreciation. But, you must file Form Single item accounts. If an item of prop
3115 for these automatic changes. Gain or loss on retirement. There are special erty is accounted for in a single item account,
However, the IRS can deny permission if rules for figuring the gain or loss on retirement the adjusted basis is the basis you would use to
Form 3115 is not filed on time. For more infor of property. The gain or loss will depend on sev figure gain or loss for a sale or exchange of the
mation on automatic changes, see the Instruc eral factors. These include the type of with property. This is generally the cost or other ba
tions for Form 3115. drawal, if the withdrawal was from a single sis of the item of property less depreciation.
property or multiple property account, and if the See Pub. 551.
Changes for which approval is not auto retirement was normal or abnormal. A single Multiple property account. For a normal
matic. The automatic change procedures do property account contains only one item of retirement from a multiple property account, if
not apply to: property. A multiple property account is one in you figured depreciation using the average ex
which several items have been combined with a pected useful life, the adjusted basis is the sal
1. Property or an account where you made a single rate of depreciation assigned to the en vage value estimated for the item of property
change in depreciation within the last 10 tire account. when it was originally acquired. If you figured
tax years (unless the change was made
under the Class Life System), Sale or exchange. If property is retired by depreciation using the maximum expected use
2. Class Life Asset Depreciation Range Sys sale or exchange, you figure gain or loss by the ful life of the longest lived item of property in the
tem, and usual rules that apply to sales or other disposi account, you must use the depreciation method
tions of property. See Pub. 544. used for the multiple property account and a
3. Public utility property. rate based on the maximum expected useful life
Property not disposed of or abandoned. of the item of property retired.
You must request and receive permission If property is retired permanently, but not dis You make the adjustment for depreciation
for these changes. To make the request, file posed of or physically abandoned, you do not for an abnormal retirement from a multiple prop
Form 3115 during the first 180 days of the tax recognize gain. You are allowed a loss in such erty account at the rate that would be proper if
year for which you want the change to be effec a case, but only if the retirement is: the item of property was depreciated in a single
tive. 1. An abnormal retirement, property account. The method of depreciation
used for the multiple property account is used.
Change from an improper method. If the 2. A normal retirement from a single property You base the rate on either the average expec
IRS disallows the method you are using, you do account in which you determined the life of ted useful life or the maximum expected useful
not need permission to change to a proper each item of property separately, or life of the retired item of property, depending on
method. You can adopt the straight line 3. A normal retirement from a multiple prop the method used to determine the depreciation
method, or any other method that would have erty account in which the depreciation rate rate for the multiple property account.
been permitted if you had used it from the be is based on the maximum expected life of
ginning. If you file your tax return using an im the longest lived item of property and the
proper method, but later file an amended return, loss occurs before the expiration of the full
you can use a proper method on the amended useful life. However, you are not allowed a
return without getting IRS permission. However, loss if the depreciation rate is based on
you must file the amended return before the fil the average useful life of the items of prop
ing date for the next tax year. erty in the account. 3.
To figure your loss, subtract the estimated
Dispositions salvage or fair market value of the property at
the date of retirement, whichever is more, from Listed Property
Retirement is the permanent withdrawal of de its adjusted basis.
preciable property from use in your trade or Special rule for normal retirements from Topics
business or for the production of income. You item accounts. You can generally deduct los This chapter discusses:
can do this by selling, exchanging, or abandon ses upon retirement of a few depreciable items
ing the item of property. You can also withdraw of property with similar useful lives, if: Listed property defined
it from use without disposing of it. For example,
you could place it in a supplies or scrap ac 1. You account for each one in a separate The predominant use test
count. Retirements can be either normal or ab account, and What records must be kept
normal depending on all facts and circumstan 2. You use the average useful life to figure
ces. The rules discussed next do not apply to depreciation. Useful Items
MACRS and ACRS property. You may want to see:
However, you cannot deduct losses if you use
Normal retirement. A normal retirement is a the average useful life to figure depreciation Publication
permanent withdrawal of depreciable property and they have a wide range of useful lives.
from use if the following apply. If you have a large number of depreciable 463 Travel, Entertainment, Gift, and Car
1. The retirement is made within the useful property items and use average useful lives to Expenses
life you estimated originally. figure depreciation, you cannot deduct the los
ses upon normal retirements from these ac 587 Business Use of Your Home
2. The property has reached a condition at counts. 946 How To Depreciate Property
which you customarily retire or would retire
similar property from use. Abandoned property. If you physically Form (and Instructions)
abandon property, you can deduct as a loss the
A retirement is generally considered normal un adjusted basis of the property at the time of its 2106EZ Unreimbursed Employee
less you can show that you retired the property abandonment. However, your intent must be to Business Expenses
Chapter 3 Listed Property Page 9

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2106 Employee Business Expenses Other Property Used for
4255 Recapture of Investment Credit Transportation Predominant Use Test
4562 Depreciation and Amortization Other property used for transportation includes If “listed property,” defined earlier, placed in
trucks, buses, boats, airplanes, motorcycles, service after June 18, 1984, is not used pre
This chapter discusses some special rules and and any other vehicles for transporting persons dominantly (more than 50%) in a qualified busi
recordkeeping requirements for listed property. or goods. ness use during any tax year:
For complete coverage of the rules, including The section 179 deduction on the property
the rules concerning passenger automobiles, Listed property does not include: is not allowable, and
see Pub. 946. You must depreciate the property using the
1. Any vehicle which, by reason of its design,
If listed property is not used predominantly is not likely to be used more than a mini straight line method.
(more than 50%) in a qualified business use as mal amount for personal purposes, such
discussed in Predominant Use Test, later, the as clearly marked police and fire vehicles, Listed property placed in service before
section 179 deduction is not allowable and the ambulances, or hearses used for those 1987. For listed property placed in service be
property must be depreciated using the straight purposes; fore 1987, depreciate the property over the fol
lowing period:
line method. 2. Any vehicle that is designed to carry cargo
and that has a loaded gross vehicle weight
over 14,000 pounds, bucket trucks (cherry Listed Property
Listed Property Defined pickers), cement mixers, combines, Class of Property Recovery Period
cranes and derricks, delivery trucks with 3year property . . . . . . . . . . . 5 years
Listed property is any of the following. seating only for the driver (or only for the 5year property . . . . . . . . . . . 12 years
driver plus a folding jump seat), dump 10year property . . . . . . . . . . 25 years
1. Any passenger automobile (defined later). trucks (including garbage trucks), flatbed 18year real property . . . . . . 40 years
2. Any other property used for transportation. trucks, forklifts, qualified moving vans, 19year real property . . . . . . 40 years
qualified specialized utility repair trucks,
3. Any property of a type generally used for and refrigerated trucks; If you must use the above recovery periods for
entertainment, recreation, or amusement listed property not used predominantly in a
(including photographic, phonographic, 3. Any passenger bus used for that purpose
communication, and video recording with a capacity of at least 20 passengers trade or business, use the percentages from
equipment). and school buses; Table 16 titled Listed Property Not Used Pre-
dominantly (Other Than 18- or 19-Year Real
4. Any computer and related peripheral 4. Any tractor or other special purpose farm Property), and Table 17 for 18 or 19year real
equipment, defined later, unless it is used vehicle, and unmarked vehicles used by property, near the end of this publication in the
only at a regular business establishment law enforcement officers if the use is offi Appendix.
and owned or leased by the person oper cially authorized; and
ating the establishment. A regular busi 5. Any vehicle, such as a taxicab, if substan Listed property placed in service after
ness establishment includes a portion of a tially all its use is in the trade or business 1986. For information on listed property placed
dwelling unit (defined later), if, and only if, of providing services to transport persons in service after 1986, see Pub. 946.
that portion is used both regularly and ex or property for compensation or hire by un
clusively for business as discussed in Pub. related persons. Meeting the Predominant
587.
Use Test
Computers and Related
Passenger Automobile Listed property meets the predominant use test
Peripheral Equipment
Defined for any tax year if its business use is more than
50% of its total use. You must allocate the use
A computer is a programmable electronically of any item of listed property used for more than
A passenger automobile is any fourwheeled activated device that: one purpose during the tax year among its vari
vehicle made primarily for use on public streets,
roads, and highways and rated at 6,000 pounds 1. Is capable of accepting information, apply ous uses. The percentage of investment use of
or less of unloaded gross vehicle weight (at ing prescribed processes to the informa listed property cannot be used as part of the
6,000 pounds or less of gross vehicle weight for tion, and supplying the results of those percentage of qualified business use to meet
trucks and vans). It includes any part, compo processes with or without human interven the predominant use test. However, the com
nent, or other item physically attached to the tion; and bined total of business and investment use is
taken into account to figure your depreciation
automobile or usually included in the purchase 2. Consists of a central processing unit with deduction for the property.
price of an automobile. extensive storage, logic, arithmetic, and
control capabilities.
A passenger automobile does not include: Note. Property does not stop being pre
1. An ambulance, hearse, or combination Related peripheral equipment is any auxili dominantly used in a qualified business use be
ambulancehearse used directly in a trade ary machine which is designed to be controlled cause of a transfer at death.
or business; and by the central processing unit of a computer.
Example. Sarah Bradley uses a home
2. A vehicle used directly in the trade or busi Computer or peripheral equipment does not computer 50% of the time to manage her in
ness of transporting persons or property include: vestments. She also uses the computer 40% of
for compensation or hire. the time in her parttime consumer research
1. Any equipment which is an integral part of business. Sarah's home computer is listed
property which is not a computer; property because it is not used at a regular
Dwelling Unit 2. Typewriters, calculators, adding and ac business establishment. Because her business
counting machines, copiers, duplicating use of the computer does not exceed 50%, the
A dwelling unit is a house or apartment used to equipment, and similar equipment; and computer is not predominantly used in a quali
provide living accommodations in a building or fied business use for the tax year. Because she
structure. It does not include a unit in a hotel, 3. Equipment of a kind, used primarily for the does not meet the predominant use test, she
motel, inn, or other establishment where more user's amusement or entertainment, such cannot elect a section 179 deduction for this
than half the units are used on a transient basis. as video games. property. Her combined rate of business/

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investment use for determining her depreciation Use of Your Passenger Automobile Method of Allocating Use
deduction is 90%. by Another Person
For passenger automobiles and other means of
If someone else uses your automobile, that use transportation, allocate the property's use on
Qualified Business Use is not business use unless: the basis of mileage. You determine the per
A qualified business use is any use in your 1. That use is directly connected with your centage of qualified business use by dividing
trade or business. However, it does not include: business, the number of miles the vehicle is driven for
business purposes during the year by the total
1. The use of property held merely to pro 2. The value of the use is properly reported number of miles the vehicle is driven for all pur
duce income (investment use), by you as income to the other person and poses (including business miles) during the
2. The leasing of property to any 5% owner tax is withheld on the income where re year.
or related person (to the point that the quired, or
property is used by a 5% owner or person 3. The value of the use results in a payment For other items of listed property, allocate
related to the owner or lessee of the prop of fair market rent. the property's use on the basis of the most ap
erty), propriate unit of time. For example, you can de
Any payment to you for the use of the automo termine the percentage of business use of a
3. The use of property as compensation for bile is treated as a rent payment for purposes of computer by dividing the number of hours the
the performance of services by a 5% item (3). computer is used for business purposes during
owner or related person, or the year by the total number of hours the com
4. The use of property as compensation for Employees puter is used for all purposes (including busi
the performance of services by any person ness hours) during the year.
(other than a 5% owner or related per- Any use by an employee of his or her own listed
son) unless the value of the use is inclu property (or listed property rented by an em Applying the Predominant
ded in that person's gross income for the ployee) in performing services as an employee Use Test
use of the property and income tax is with is not business use unless:
held on that amount where required. See The use is for the employer's convenience, You must apply the predominant use test for an
Employees, later. and item of listed property each year of the recovery
The use is required as a condition of em
5% owner. A 5% owner of a business, other ployment. period.
than a corporation, is any person who owns
more than 5% of the capital or profits interest in Use for the employer's convenience. First Recovery Year
the business. Whether the use of listed property is for the em
A 5% owner of a corporation is any person ployer's convenience must be determined from If any item of listed property is not used pre
who owns, or is considered to own: all the facts. The use is for the employer's con dominantly in a qualified business use in the
More than 5% of the outstanding stock of venience if it is for a substantial business rea year it is placed in service:
the corporation, or son of the employer. The use of listed property 1. The property is not eligible for a section
Stock possessing more than 5% of the to during the employee's regular working hours to 179 deduction, and
tal combined voting power of all stock in carry on the employer's business is generally
the corporation. for the employer's convenience. 2. The depreciation deduction must be fig
ured using the straight line method.
Related person. A related person is anyone Use required as a condition of employment.
related to a taxpayer as discussed under Rela- Whether the use of listed property is a condition Note. The required use of the straight line
ted persons in chapter 1 in Pub. 946. of employment depends on all the facts and cir method for an item of listed property that does
cumstances. The use of property must be re not meet the predominant use test is not the
quired for the employee to perform duties prop same as electing the straight line method. It
Entertainment Use erly. The employer need not explicitly require does not mean that you have to use the straight
The use of listed property for entertainment, the employee to use the property. A mere state line method for other property in the same class
recreation, or amusement purposes is treated ment by the employer that the use of the prop as the item of listed property.
as a qualified business use only to the extent erty is a condition of employment is not suffi
that expenses (other than interest and property cient. Years After the First Recovery
tax expenses) for its use are deductible as ordi Year
nary and necessary business expenses. See Example 1. Virginia Sycamore is employed
Pub. 463. as a courier with We Deliver which provides lo If you use listed property predominantly (more
cal courier services. She owns and uses a mo than 50%) in a qualified business use in the tax
torcycle to deliver packages to downtown offi year you place it in service, but not in a subse
Leasing or Compensatory Use of ces. We Deliver explicitly requires all delivery quent tax year during the recovery period, the
Aircraft persons to own a small car or motorcycle for following rules apply.
use in their employment. The company reimbur
If at least 25% of the total use of any aircraft ses delivery persons for their costs. Virginia's 1. Figure depreciation using the straight line
during the tax year is for a qualified business use of the motorcycle is for the convenience of method. Do this for each year, beginning
use, the leasing or compensatory use of the air We Deliver and is required as a condition of with the year you no longer use the prop
craft by a 5% owner or related person is treated employment. erty predominantly in a qualified business
as a qualified business use. use.
Example 2. Bill Nelson is an inspector for 2. Figure any excess depreciation on the
Commuting Uplift, a construction company with many sites property and add it to:
in the local area. He must travel to these sites
The use of a vehicle for commuting is not busi on a regular basis. Uplift does not furnish an au a. Your gross income, and
ness use, regardless of whether work is per tomobile or explicitly require him to use his own b. The adjusted basis of your property.
formed during the trip. automobile. However, it reimburses him for any
costs he incurs in traveling to the various sites. See Recapture of excess depreciation next.
The use of his own automobile or a rental auto
mobile is for the convenience of Uplift and is re Recapture of excess depreciation. You
quired as a condition of employment. must include any excess depreciation in your
gross income for the first tax year the property
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is not predominantly used in a qualified busi the employer's property for personal purposes How long to keep records. For listed prop
ness use. Any excess depreciation must also and charges the employee for the use is not erty, records must be kept for as long as any
be added to the adjusted basis of your property. regularly engaged in the business of leasing the excess depreciation can be recaptured (inclu
Excess depreciation is the excess (if any) of: property used by the employee. ded in income).
1. The amount of depreciation allowable for
the property (including any section 179 Lessee Adequate Records
deduction claimed) for tax years before
the first tax year the property was not pre A lessee of listed property (other than passen To meet the adequate records requirement, you
dominantly used in a qualified business ger automobiles) must include an amount in must maintain an account book, diary, log,
use, over gross income called the inclusion amount for statement of expense, trip sheet, or similar re
2. The amount of depreciation that would the first tax year the property is not used pre cord or other documentary evidence that, to
have been allowable for those years if the dominantly in a qualified business use. gether with the receipt, is sufficient to establish
property were not used predominantly in a each element of an expenditure or use. It is not
qualified business use for the year it was Inclusion amount for property leased be necessary to record information in an account
placed in service. This means you figure fore 1987. You determine the inclusion book, diary, or similar record if the information is
your depreciation using the percentages amount for property leased after June 18, 1984, already shown on the receipt. However, your
from Table 16 or 17. and before 1987 by multiplying the fair market records should back up your receipts in an or
value of the property by both the average busi derly manner.
For information on investment credit recapture, ness/investment use percentage and the appli
see the instructions for Form 4255. cable percentage. You can find the applicable
percentages for listed property that is 5 or Elements of Expenditure or Use
10year recovery property in Table 19 or 20 in The records or other documentary evidence
Deductions After the Appendix. must support:
The lease term for listed property other
Recovery Period than 18 or 19year real property, and residen 1. The amount of each separate expenditure,
tial rental or nonresidential real property, in such as the cost of acquiring the item,
When listed property (other than passenger au cludes options to renew. For 18 or 19year real maintenance and repair costs, capital im
tomobiles) is used for business, investment, property and residential rental or nonresidential provement costs, lease payments, and
and personal purposes, no deduction is ever al real property that is listed property, the period of any other expenses;
lowable for the personal use. In tax years after the lease does not include any option to renew 2. The amount of each business and invest
the recovery period, you must determine if there at fair market value, determined at the time of ment use (based on an appropriate meas
is any unrecovered basis remaining before you renewal. You treat two or more successive ure, such as mileage for vehicles and time
compute the depreciation deduction for that tax leases that are part of the same transaction (or for other listed property), and the total use
year. To make this determination, figure the de a series of related transactions) for the same or of the property for the tax year;
preciation for earlier tax years as if your prop substantially similar property as one lease.
erty were used 100% for business or invest 3. The date of the expenditure or use; and
ment purposes, beginning with the first tax year Special rules. The lessee adds the inclusion 4. The business or investment purpose for
in which some or all use is for business or in amount to gross income in the next tax year if: the expenditure or use.
vestment. See Car Used 50% or Less for Busi- The lease term begins within 9 months be
ness in chapter 4 of Pub. 463. fore the close of the lessee's tax year,
The lessee does not use the property pre Written documents of your expenditure or
dominantly in a qualified business use dur use are generally better evidence than oral
Leased Property ing that portion of the tax year, and statements alone. A written record prepared at
The lease term continues into the lessee's or near the time of the expenditure or use has
The limitations on cost recovery deductions ap next tax year. greater value as proof of the expenditure or
use. A daily log is not required. However, some
ply to the rental of listed property. The following The lessee determines the inclusion amount by type of record containing the elements of an ex
discussion covers the rules that apply to the les taking into account the average of the business/ penditure or the business or investment use of
sor (the owner of the property) and the lessee investment use for both tax years and the appli listed property made at or near the time and
(the person who rents the property from the cable percentage for the tax year the lease term backed up by other documents is preferable to
owner). See Leasing a Car in chapter 4 of Pub. begins. a statement prepared later.
463 for a discussion of leased passenger auto If the lease term is less than one year, the
mobiles. amount included in gross income is the amount Timeliness
that bears the same ratio to the additional inclu
Lessor sion amount as the number of days in the lease The elements of an expenditure or use must be
term bears to 365. recorded at the time you have full knowledge of
The limitations on cost recovery generally do the elements. An expense account statement
not apply to any listed property leased or held Maximum inclusion amount. The inclusion made from an account book, diary, or similar re
for leasing by anyone regularly engaged in the amount cannot be more than the sum of the de cord prepared or maintained at or near the time
business of leasing listed property. ductible amounts of rent allocable to the les of the expenditure or use is generally consid
see's tax year in which the amount must be in ered a timely record if in the regular course of
A person is considered regularly engaged cluded in gross income. business:
in the business of leasing listed property only
if contracts for leasing of listed property are en 1. The statement is submitted by an em
tered into with some frequency over a continu What Records Must Be ployee to the employer, or
ous period of time. This determination is made 2. The statement is submitted by an inde
on the basis of the facts and circumstances in Kept pendent contractor to the client or cus
each case and takes into account the nature of tomer.
the person's business in its entirety. Occasional You cannot take any depreciation or section
or incidental leasing activity is insufficient. For 179 deduction for the use of listed property (in
example, a person leasing only one passenger cluding passenger automobiles) unless you can For example, a log maintained on a weekly
automobile during a tax year is not regularly en prove business/investment use with adequate basis, which accounts for use during the week,
gaged in the business of leasing automobiles. records or sufficient evidence to support your will be considered a record made at or near the
An employer who allows an employee to use own statements. time of use.

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Business Purpose Supported                             need to be in the account book or similar record       ard  mileage  rate  may  be  able  to  use  Form 
                                                       if it is recorded at or near the time of the expen    2106EZ.
An adequate record of business purpose must            diture  or  use.  It  must  be  kept  elsewhere  and 
generally be in the form of a written statement.       made available as support to the district director     Employer who provides vehicles to employ
However,  the  amount  of  backup  necessary  to       on request.                                            ees. An  employer  who  provides  vehicles  to 
establish  a  business  purpose  depends  on  the                                                             employees  must  obtain  enough  information 
facts and circumstances of each case. A written        Substantial Compliance                                 from those employees to provide the requested 
explanation of the business purpose will not be                                                               information on Form 4562.
required if the purpose can be determined from         If you have not fully supported a particular ele          An  employer  who  provides  more  than  five 
the  surrounding  facts  and  circumstances.  For      ment of an expenditure or use, but have com           vehicles to employees need not include any in
example,  a  salesperson  visiting  customers  on      plied with the adequate records requirement for        formation on his or her tax return. Instead, the 
an  established  sales  route  will  not  normally     the expenditure or use to the district director's      employer  must  obtain  the  information  from  his 
need a written explanation of the business pur        satisfaction,  you  can  establish  this  element  by  or her employees and indicate on his or her re
pose of his or her travel.                             any  evidence  the  district  director  deems  ade    turn  that  the  information  was  obtained  and  is 
                                                       quate.                                                 being retained.
Business Use Supported                                                                                            You do not need to provide the information 
                                                       If you fail to establish that you have substan        requested on page 2 of Form 4562 if, as an em
An  adequate  record  contains  enough  informa       tially  complied  with  the  adequate  records  re    ployer:
tion  on  each  element  of  every  business  or  in  quirement for an element of an expenditure or          1. You can satisfy the requirements of a writ
vestment use. The amount of detail required to         use  to  the  district  director's  satisfaction,  you      ten policy statement for vehicles either not 
support the use depends on the facts and cir          must establish the element:                                 used for personal purposes, or not used 
cumstances.  For  example,  a  taxpayer  whose                                                                     for personal purposes other than commut
only  business  use  of  a  truck  is  to  make  cus  1. By your own oral or written statement con
tomer  deliveries  on  an  established  route  can           taining detailed information as to the ele           ing; or
satisfy the requirement by recording the length              ment, and                                        2. You treat all vehicle use by employees as 
of the route, including the total number of miles      2. By other evidence sufficient to establish                personal use.
driven during the tax year and the date of each              the element.                                     See the Instructions for Form 4562.
trip at or near the time of the trips.
                                                       If  the  element  is  the  cost  or  amount,  time, 
Although an adequate record generally must             place, or date of an expenditure or use, its sup      Deductions in Later 
be written, a record of the business use of listed     porting  evidence  must  be  direct,  such  as  oral 
property,  such  as  a  computer  or  automobile,      testimony  by  witnesses  or  a  written  statement    Years
can be prepared in a computer memory device            setting forth detailed information about the ele
using a logging program.                               ment  or  the  documentary  evidence.  If  the  ele   When  listed  property  is  used  for  business,  in
                                                       ment  is  the  business  purpose  of  an  expendi     vestment, and personal purposes, no deduction 
Separate or Combined                                   ture,  its  supporting   evidence can be               is  allowable  for  its  personal  use  either  in  the 
Expenditures or Uses                                   circumstantial evidence.                               current year or any later tax year. In later years, 
                                                                                                              you  must  determine  if  there  is  any  remaining 
Each use by you is normally considered a sepa         Sampling                                               unadjusted  or  unrecovered  basis  before  you 
rate use. However, repeated uses can be com                                                                  compute the depreciation deduction for that tax 
bined as a single item.                                You  can  maintain  an  adequate  record  for  por    year.  In  making  this  determination,  figure  the 
                                                       tions of a tax year and use that record to sup        depreciation deductions for earlier tax years as 
Each expenditure is recorded as a separate             port  your  business  and  investment  use  for  the   if the listed property were used 100% for busi
item and not combined with other expenditures.         entire tax year if it can be shown by other evi       ness or investment purposes in those years, be
If you choose, however, amounts spent for the          dence  that  the  periods  for  which  an  adequate    ginning with the first tax year in which some or 
use of listed property during a tax year, such as      record  is  maintained  are  representative  of  use   all of the property use is for business or invest
for gasoline or automobile repairs, can be com        throughout the year.                                   ment.
bined. If these expenses are combined, you do 
not  need  to  support  the  business  purpose  of                                                                For more information about deductions after 
each expense. Instead, you can divide the ex          Loss of Records                                        the  recovery  period  for  automobiles,  see  Pub. 
penses based on the total business use of the          When you establish that failure to produce ade        463.
listed property.                                       quate  records  is  due  to  loss  of  the  records 
                                                       through  circumstances  beyond  your  control, 
Uses which can be considered part of a sin            such as through fire, flood, earthquake, or other      How To Get Tax Help
gle  use,  such  as  a  round  trip  or  uninterrupted casualty, you have the right to support a deduc
business use, can be accounted for by a single         tion  by  reasonable  reconstruction  of  your  ex    If  you  have  questions  about  a  tax  issue,  need 
record. For example, use of a truck to make de        penditures and use.                                    help preparing your tax return, or want to down
liveries  at  several  locations  which  begin  and                                                           load free publications, forms, or instructions, go 
end at the business premises and can include a                                                                to IRS.gov and find resources that can help you 
stop at the business in between deliveries can         Reporting Information                                  right away.
be  accounted  for  by  a  single  record  of  miles   on Form 4562
driven.  Use  of  a  passenger  automobile  by  a                                                             Preparing  and  filing  your  tax  return. Find 
salesperson for a business trip away from home         If you claim a deduction for any listed property,      free  options  to  prepare  and  file  your  return  on 
over a period of time can be accounted for by a        you must provide the requested information on          IRS.gov or in your local community if you qual
single  record  of  miles  traveled.  Minimal  per    page 2 of Form 4562. If you claim a deduction          ify.
sonal  use  (such  as  a  stop  for  lunch  between    for any vehicle, you must answer certain ques             The  Volunteer  Income  Tax  Assistance 
two  business  stops)  is  not  an  interruption  of   tions on page 2 of Form 4562 to provide infor         (VITA)  program  offers  free  tax  help  to  people 
business use.                                          mation about the vehicle use.                          who  generally  make  $54,000  or  less,  persons 
                                                                                                              with  disabilities,  the  elderly,  and  limitedEng
Confidential Information                               Employees.  Employees claiming the standard            lishspeaking taxpayers who need help prepar
                                                       mileage rate or actual expenses (including de         ing  their  own  tax  returns.  The  Tax  Counseling 
If any of the information on the elements of an        preciation) must use Form 2106 instead of Part         for  the  Elderly  (TCE)  program  offers  free  tax 
expenditure  or  use  is  confidential,  it  does  not V of Form 4562. Employees claiming the stand          help for all taxpayers, particularly those who are 
Publication 534 (November 2016)                                                                                                            Page 13

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60 years of age and older. TCE volunteers spe Mail" to order a copy of your transcript. If you Electronic Funds Withdrawal: Offered
cialize in answering questions about pensions prefer, you can: only when filing your federal taxes using
and retirementrelated issues unique to seniors. Order your transcript by calling tax preparation software or through a tax
You can go to IRS.gov and click on the Fil 18009089946. professional.
ing tab to see your options for preparing and fil Mail Form 4506T or Form 4506TEZ (both Electronic Federal Tax Payment Sys
ing your return which include the following. available on IRS.gov). tem: Best option for businesses. Enroll
Free File. Go to IRS.gov/freefile. See if ment is required.
you qualify to use brandname software to Using online tools to help prepare your re Check or money order: Mail your pay
prepare and e-file your federal tax return turn. Go to IRS.gov/tools for the following. ment to the address listed on the notice or
for free. The Earned Income Tax Credit Assistant instructions.
VITA. Go to IRS.gov/vita, download the (IRS.gov/eic) determines if you are eligible Cash: If cash is your only option, you may
free IRS2Go app, or call 18009069887 for the EIC. be able to pay your taxes at a participating
to find the nearest VITA location for free The Online EIN Application IRS.gov/ein ( ) retail store.
tax preparation. helps you get an employer identification
TCE. Go to IRS.gov/tce, download the free number. What if I can’t pay now? Go to IRS.gov/
IRS2Go app, or call 18882277669 to The IRS Withholding Calculator IRS.gov/ ( payments for more information about your op
find the nearest TCE location for free tax w4app) estimates the amount you should tions.
preparation. have withheld from your paycheck for fed Apply for an online payment agreement
eral income tax purposes. (IRS.gov/opa) to meet your tax obligation
Getting answers to your tax law The First Time Homebuyer Credit Account in monthly installments if you can’t pay
questions. On IRS.gov get answers to Look-up IRS.gov/homebuyer ( ) tool pro your taxes in full today. Once you complete
your tax questions anytime, anywhere. vides information on your repayments and the online process, you will receive imme
account balance. diate notification of whether your agree
Go to IRS.gov/help or IRS.gov/letushelp The Sales Tax Deduction Calculator ment has been approved.
pages for a variety of tools that will help (IRS.gov/salestax) figures the amount you Use the Offer in Compromise Pre-Qualifier
you get answers to some of the most com can claim if you itemize deductions on (IRS.gov/oic) to see if you can settle your
mon tax questions. Schedule A (Form 1040), choose not to tax debt for less than the full amount you
Go to IRS.gov/ita for the Interactive Tax claim state and local income taxes, and owe.
Assistant, a tool that will ask you questions you didn’t save your receipts showing the
on a number of tax law topics and provide sales tax you paid. Checking the status of an amended return.
answers. You can print the entire interview Go to IRS.gov and click on Where’s My
and the final response for your records. Resolving taxrelated identity theft issues. Amended Return? IRS.gov/wmar ( ) under the
Go to IRS.gov/pub17 to get Pub. 17, Your The IRS doesn’t initiate contact with tax “Tools” bar to track the status of Form 1040X
Federal Income Tax for Individuals, which payers by email or telephone to request amended returns. Please note that it can take
features details on taxsaving opportuni personal or financial information. This in up to 3 weeks from the date you mailed your
ties, tax changes, and thousands of inter cludes any type of electronic communica amended return for it show up in our system
active links to help you find answers to tion, such as text messages and social me and processing it can take up to 16 weeks.
your questions. View it online in HTML or dia channels.
as a PDF or, better yet, download it to your Go to IRS.gov/idprotection for information Understanding an IRS notice or letter. Go to
mobile device to enjoy eBook features. and videos. IRS.gov/notices to find additional information
You may also be able to access tax law in If your SSN has been lost or stolen or you about responding to an IRS notice or letter.
formation in your electronic filing software. suspect you are a victim of taxrelated
identity theft, visit IRS.gov/id to learn what Contacting your local IRS office. Keep in
steps you should take. mind, many questions can be resolved on
Getting tax forms and publications. Go to IRS.gov without visiting an IRS Tax Assistance
IRS.gov/forms to view, download, or print all of Checking on the status of your refund. Center (TAC). Go to IRS.gov/letushelp for the
the forms and publications you may need. You Go to IRS.gov/refunds. topics people ask about most. If you still need
can also download and view popular tax publi Due to changes in the law, the IRS can’t is help, IRS TACs provide tax help when a tax is
cations and instructions (including the 1040 in sue refunds before February 15, 2017, for sue can’t be handled online or by phone. All
structions) on mobile devices as an eBook at no 2016 returns that claim the EIC or the TACs now provide service by appointment so
charge. Or, you can go to IRS.gov/orderforms ACTC. This applies to the entire refund, you’ll know in advance that you can get the
to place an order and have forms mailed to you not just the portion associated with these service you need without waiting. Before you
within 10 business days. credits. visit, go to IRS.gov/taclocator to find the nearest
Download the official IRS2Go app to your TAC, check hours, available services, and ap
Using direct deposit. The fastest way to re mobile device to check your refund status. pointment options. Or, on the IRS2Go app, un
ceive a tax refund is to combine direct deposit Call the automated refund hotline at der the Stay Connected tab, choose the Con
and IRS e-file. Direct deposit securely and elec 18008291954. tact Us option and click on “Local Offices.”
tronically transfers your refund directly into your
financial account. Eight in 10 taxpayers use di Making a tax payment. The IRS uses the lat Watching IRS videos. The IRS Video portal
rect deposit to receive their refund. IRS issues est encryption technology to ensure your elec (IRSvideos.gov) contains video and audio pre
more than 90% of refunds in less than 21 days. tronic payments are safe and secure. You can sentations for individuals, small businesses,
make electronic payments online, by phone, and tax professionals.
Delayed refund for returns claiming certain and from a mobile device using the IRS2Go
credits. Due to changes in the law, the IRS app. Paying electronically is quick, easy, and Getting tax information in other languages.
can’t issue refunds before February 15, 2017, faster than mailing in a check or money order. For taxpayers whose native language isn’t Eng
for 2016 returns that claim the earned income Go to IRS.gov/payments to make a payment lish, we have the following resources available.
credit (EIC) or the additional child tax credit using any of the following options. Taxpayers can find information on IRS.gov in
(ACTC). This applies to the entire refund, not IRS Direct Pay: Pay your individual tax bill the following languages.
just the portion associated with these credits. or estimated tax payment directly from Spanish IRS.gov/spanish ( ).
your checking or savings account at no Chinese IRS.gov/chinese ( ).
Getting a transcript or copy of a return. The cost to you. Vietnamese IRS.gov/vietnamese ( ).
quickest way to get a copy of your tax transcript Debit or credit card: Choose an ap Korean IRS.gov/korean ( ).
is to go to IRS.gov/transcripts. Click on either proved payment processor to pay online, Russian IRS.gov/russian ( ).
"Get Transcript Online" or "Get Transcript by by phone, and by mobile device.

Page 14 Publication 534 (November 2016)

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The IRS TACs provide overthephone inter You face (or your business is facing) an How Else Does the Taxpayer
preter service in over 170 languages, and the immediate threat of adverse action, or Advocate Service Help Taxpayers?
service is available free to taxpayers. You’ve tried repeatedly to contact the IRS
but no one has responded, or the IRS TAS works to resolve largescale problems that
hasn’t responded by the date promised. affect many taxpayers. If you know of one of
The Taxpayer Advocate these broad issues, please report it to us at
Service Is Here To Help You IRS.gov/sams.
How Can You Reach Us?
What is the Taxpayer Advocate
Service? We have offices in every state, the District of Low Income Taxpayer
Columbia, and Puerto Rico. Your local advo
The Taxpayer Advocate Service (TAS) is an in- cate’s number is in your local directory and at Clinics
dependent organization within the IRS that taxpayeradvocate.irs.gov. You can also call us
helps taxpayers and protects taxpayer rights. at 18777774778. Low Income Taxpayer Clinics (LITCs) serve in
Our job is to ensure that every taxpayer is dividuals whose income is below a certain level
and need to resolve tax problems such as au
treated fairly and that you know and understand How Can You Learn About Your dits, appeals, and tax collection disputes. Some
your rights under the Taxpayer Bill of Rights. Taxpayer Rights? clinics can provide information about taxpayer
rights and responsibilities in different languages
What Can the Taxpayer Advocate The Taxpayer Bill of Rights describes 10 basic for individuals who speak English as a second
Service Do For You? rights that all taxpayers have when dealing with language. To find a clinic near you, visit
the IRS. Our Tax Toolkit at IRS.gov/litc or see IRS Publication 4134, Low
We can help you resolve problems that you taxpayeradvocate.irs.gov can help you under Income Taxpayer Clinic List.
can’t resolve with the IRS. And our service is stand what these rights mean to you and how
free. If you qualify for our assistance, you will be they apply. These are your rights. Know them.
assigned to one advocate who will work with Use them. Appendix
you throughout the process and will do every
thing possible to resolve your issue. TAS can The following tables are for use in figuring de
help you if: preciation deductions under the ACRS system.
Your problem is causing financial difficulty
for you, your family, or your business,

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ACRS Percentage Tables
 
Table 1. 15Year Real Property* (Other Than LowIncome Housing)
                                                                    Month Placed in Service
 Year
        1      2      3                                  4     5    6    7                 8    9    10   11             12
 1st    12.00% 11.0%  10.0%                              9.0%  8.0% 7.0% 6.0%              5.0% 4.0% 3.0% 2.0%           1.0%
 2nd    10.0   10.0   11.0                               11.0  11.0 11.0 11.0              11.0 11.0 11.0 11.0           12.0
 3rd    9.0    9.0    9.0                                9.0   10.0 10.0 10.0              10.0 10.0 10.0 10.0           10.0
 4th    8.0    8.0    8.0                                8.0   8.0  8.0  9.0               9.0  9.0  9.0  9.0            9.0
 5th    7.0    7.0    7.0                                7.0   7.0  7.0  8.0               8.0  8.0  8.0  8.0            8.0
 6th    6.0    6.0    6.0                                6.0   7.0  7.0  7.0               7.0  7.0  7.0  7.0            7.0
 7th    6.0    6.0    6.0                                6.0   6.0  6.0  6.0               6.0  6.0  6.0  6.0            6.0
 8th    6.0    6.0    6.0                                6.0   6.0  6.0  5.0               6.0  6.0  6.0  6.0            6.0
 9th    6.0    6.0    6.0                                6.0   5.0  6.0  5.0               5.0  5.0  6.0  6.0            6.0
 10th   5.0    6.0    5.0                                6.0   5.0  5.0  5.0               5.0  5.0  5.0  6.0            5.0
 11th   5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 12th   5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 13th   5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 14th   5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 15th   5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 16th   —      —      1.0                                1.0   2.0  2.0  3.0               3.0  4.0  4.0  4.0            5.0
 * Placed In Service After 1980 and Before March 16, 1984

Table 2. LowIncome Housing*
                                                                    Month Placed in Service
 Year
        1      2      3                                  4     5    6    7                 8    9    10   11             12
 1st    13.0%  12.0%  11.0%                              10.0% 9.0% 8.0% 7.0%              6.0% 4.0% 3.0% 2.0%           1.0%
 2nd    12.0   12.0   12.0                               12.0  12.0 12.0 12.0              13.0 13.0 13.0 13.0           13.0
 3rd    10.0   10.0   10.0                               10.0  11.0 11.0 11.0              11.0 11.0 11.0 11.0           11.0
 4th    9.0    9.0    9.0                                9.0   9.0  9.0  9.0               9.0  10.0 10.0 10.0           10.0
 5th    8.0    8.0    8.0                                8.0   8.0  8.0  8.0               8.0  8.0  8.0  8.0            9.0

 6th    7.0    7.0    7.0                                7.0   7.0  7.0  7.0               7.0  7.0  7.0  7.0            7.0
 7th    6.0    6.0    6.0                                6.0   6.0  6.0  6.0               6.0  6.0  6.0  6.0            6.0
 8th    5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  6.0            6.0
 9th    5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 10th   5.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0

 11th   4.0    5.0    5.0                                5.0   5.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 12th   4.0    4.0    4.0                                5.0   4.0  5.0  5.0               5.0  5.0  5.0  5.0            5.0
 13th   4.0    4.0    4.0                                4.0   4.0  4.0  5.0               4.0  5.0  5.0  5.0            5.0
 14th   4.0    4.0    4.0                                4.0   4.0  4.0  4.0               4.0  4.0  5.0  4.0            4.0
 15th   4.0    4.0    4.0                                4.0   4.0  4.0  4.0               4.0  4.0  4.0  4.0            4.0
 16th   —      —      1.0                                1.0   2.0  2.0  2.0               3.0  3.0  3.0  4.0            4.0
 * Placed In Service After 1980 and Before May 9, 1985

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Table 3. LowIncome Housing*
                                                                         Month Placed in Service
Year    1     2                 3                              4         5         6        7              8      9    10     11    12
1st     13.3% 12.2%             11.1%                          10.0%     8.9%      7.8%      6.6%          5.6%   4.4%   3.3% 2.2%  1.1%
2nd     11.6  11.7              11.9                           12.0      12.1     12.3      12.5         12.6     12.7 12.9   13.0  13.2
3rd     10.0  10.1              10.2                           10.4      10.5     10.7      10.8         10.9     11.1 11.2   11.3  11.4
4th     8.7   8.8               8.9                            9.0       9.1       9.2       9.3           9.5    9.6    9.7  9.8   9.9
5th     7.5   7.6               7.7                            7.8       7.9       8.0       8.1           8.2    8.3    8.4  8.5   8.6
6th     6.5   6.6               6.7                            6.8       6.9       6.9       7.0           7.1    7.2    7.3  7.4   7.4
7th     5.7   5.7               5.8                            5.9       5.9       6.0       6.1           6.1    6.2    6.3  6.4   6.5
8th     4.9   5.0               5.0                            5.1       5.2       5.2       5.3           5.3    5.4    5.5  5.5   5.6
9th     4.6   4.6               4.6                            4.6       4.6       4.6       4.6           4.6    4.6    4.7  4.8   4.8
10th    4.6   4.6               4.6                            4.6       4.6       4.6       4.6           4.6    4.6    4.6  4.6   4.6
11th    4.6   4.6               4.6                            4.6       4.6       4.6       4.6           4.6    4.6    4.6  4.6   4.6
12th    4.5   4.6               4.6                            4.6       4.6       4.6       4.6           4.6    4.6    4.6  4.6   4.6
13th    4.5   4.5               4.6                            4.5       4.6       4.6       4.6           4.6    4.6    4.5  4.6   4.6
14th    4.5   4.5               4.5                            4.5       4.5       4.5       4.5           4.6    4.6    4.5  4.5   4.5
15th    4.5   4.5               4.5                            4.5       4.5       4.5       4.5           4.5    4.5    4.5  4.5   4.5
16th    —     0.4               0.7                            1.1       1.5       1.9       2.3           2.6    3.0    3.4  3.7   4.1
* Placed In Service After May 8, 1985, and Before 1987

Table 4. 18Year Real Property*
                                                                         Month Placed in Service
Year    1     2                 3                              4         5         6        7              8      9    10     11    12
1st     9.0%  9.0%              8.0%                           7.0%      6.0%      5.0%      4.0%          4.0%   3.0%   2.0% 1.0%  0.4%
2nd     9.0   9.0               9.0                            9.0       9.0       9.0       9.0           9.0    9.0  10.0   10.0  10.0
3rd     8.0   8.0               8.0                            8.0       8.0       8.0       8.0           8.0    9.0    9.0  9.0   9.0
4th     7.0   7.0               7.0                            7.0       7.0       8.0       8.0           8.0    8.0    8.0  8.0   8.0
5th     7.0   7.0               7.0                            7.0       7.0       7.0       7.0           7.0    7.0    7.0  7.0   7.0
6th     6.0   6.0               6.0                            6.0       6.0       6.0       6.0           6.0    6.0    6.0  6.0   6.0
7th     5.0   5.0               5.0                            5.0       6.0       6.0       6.0           6.0    6.0    6.0  6.0   6.0
812th  5.0   5.0               5.0                            5.0       5.0       5.0       5.0           5.0    5.0    5.0  5.0   5.0
13th    4.0   4.0               4.0                            5.0       4.0       4.0       5.0           4.0    4.0    4.0  5.0   5.0
1417th 4.0   4.0               4.0                            4.0       4.0       4.0       4.0           4.0    4.0    4.0  4.0   4.0
18th    4.0   3.0               4.0                            4.0       4.0       4.0       4.0           4.0    4.0    4.0  4.0   4.0
19th    —     1.0               1.0                            1.0       2.0       2.0       2.0           3.0    3.0    3.0  3.0   3.6
* Placed In Service After June 22, 1984, and Before May 9, 1985

Table 5. 18Year Real Property*
                                                                                Month Placed in Service
Year    1       2                                     3             4         5         6              7        8      9      10–11 12
1st     10.0%   9.0%                                  8.0%          7.0%      6.0%      6.0%           5.0%     4.0%   3.0%   2.0%  1.0%
2nd     9.0     9.0                                   9.0           9.0       9.0       9.0            9.0      9.0    9.0    10.0  10.0
3rd     8.0     8.0                                   8.0           8.0       8.0       8.0            8.0      8.0    9.0    9.0   9.0
4th     7.0     7.0                                   7.0           7.0       7.0       7.0            8.0      8.0    8.0    8.0   8.0
5th     6.0     7.0                                   7.0           7.0       7.0       7.0            7.0      7.0    7.0    7.0   7.0
6th     6.0     6.0                                   6.0           6.0       6.0       6.0            6.0      6.0    6.0    6.0   6.0
7th     5.0     5.0                                   5.0           5.0       6.0       6.0            6.0      6.0    6.0    6.0   6.0
812th  5.0     5.0                                   5.0           5.0       5.0       5.0            5.0      5.0    5.0    5.0   5.0
13th    4.0     4.0                                   4.0           5.0       5.0       4.0            4.0      5.0    4.0    4.0   4.0
1418th 4.0     4.0                                   4.0           4.0       4.0       4.0            4.0      4.0    4.0    4.0   4.0
19th    —     —                                       1.0           1.0       1.0       2.0            2.0      2.0    3.0    3.0   4.0
* Placed In Service After March 15 and Before June 23, 1984

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Table 6. 19Year Real Property*
                                                                     Month Placed in Service
Year            1    2                          3               4    5      6               7      8         9        10      11         12
1st             8.8% 8.1%                    7.3%               6.5% 5.8%   5.0% 4.2%              3.5%      2.7%     1.9%    1.1%      0.4%
2nd             8.4  8.5                     8.5                8.6  8.7    8.8  8.8               8.9       9.0      9.0     9.1       9.2
3rd             7.6  7.7                     7.7                7.8  7.9    7.9  8.0               8.1       8.1      8.2     8.3       8.3
4th             6.9  7.0                     7.0                7.1  7.1    7.2  7.3               7.3       7.4      7.4     7.5       7.6
5th             6.3  6.3                     6.4                6.4  6.5    6.5  6.6               6.6       6.7      6.8     6.8       6.9
6th             5.7  5.7                     5.8                5.9  5.9    5.9  6.0               6.0       6.1      6.1     6.2       6.2
7th             5.2  5.2                     5.3                5.3  5.3    5.4  5.4               5.5       5.5      5.6     5.6       5.6
8th             4.7  4.7                     4.8                4.8  4.8    4.9  4.9               5.0       5.0      5.1     5.1       5.1
9th             4.2  4.3                     4.3                4.4  4.4    4.5  4.5               4.5       4.5      4.6     4.6       4.7
1019th         4.2  4.2                     4.2                4.2  4.2    4.2  4.2               4.2       4.2      4.2     4.2       4.2
20th            0.2  0.5                     0.9                1.2  1.6    1.9  2.3               2.6       3.0      3.3     3.7       4.0
* Placed In Service After May 8, 1985, and Before 1987

Table 7. 18Year Real Property*
                                                                            Month Placed in Service
        Year                            1–2                     3–4         5–7                  8–9              10–11            12
        1st                             5.0%                    4.0%        3.0%                   2.0%              1.0%          0.2%
210th                                  6.0                     6.0         6.0                    6.0               6.0           6.0
        11th                            5.0                     5.0         5.0                    5.0               5.0           5.8
1218th                                 5.0                     5.0         5.0                    5.0               5.0           5.0
        19th                            1.0                     2.0         3.0                    4.0               5.0           5.0
* Placed In Service After June 22, 1984
If Alternate ACRS Method Elected Over 18Year Period

Table 8. 18Year Real Property*
                                                                            Month Placed in Service
        Year         1                                     2–3       4–5         6–7                    8–9           10–11           12
        1st          6.0%                                  5.0%        4.0%      3.0%                   2.0%             1.0%         0.5%
210th               6.0                                   6.0         6.0       6.0                    6.0              6.0          6.0
11th                 5.0                                   5.0         5.0       5.0                    5.0              5.0          5.5
1218th              5.0                                   5.0         5.0       5.0                    5.0              5.0          5.0
19th                 —                                     1.0         2.0       3.0                    4.0              5.0          5.0
* Placed In Service After March 15 and Before June 23, 1984
If Alternate ACRS Method Elected Over 18Year Period

Table 9. 19Year Real Property*
                                                                     Month Placed in Service
Year            1    2                       3                  4    5      6    7                 8         9        10      11         12
1st             5.0% 4.6%                    4.2%               3.7% 3.3%   2.9%            2.4%   2.0%      1.5%     1.1%    0.7%      0.2%
213th          5.3  5.3                     5.3                5.3  5.3    5.3             5.3    5.3       5.3      5.3     5.3       5.3
1419th         5.2  5.2                     5.2                5.2  5.2    5.2             5.2    5.2       5.2      5.2     5.2       5.2
20th            0.2  0.6                     1.0                1.5  1.9    2.3             2.8    3.2       3.7      4.1     4.5       5.0
* If Alternate ACRS Method Elected Over 19Year Period

Table 10. 18Year Real Property*
                                                                              Month Placed in Service
         Year                               1–2                      3–6         7–10                          11                  12
            1st                              3.0%                    2.0%                   1.0%                 0.4%              0.1%
        230th                               3.0                     3.0                    3.0                  3.0               3.0
         31st                                2.0                     2.0                    2.0                  2.6               2.9
        3235th                              2.0                     2.0                    2.0                  2.0               2.0
         36th                               —                        1.0                    2.0                  2.0               2.0
* Placed In Service After June 22, 1984 
If Alternate ACRS Method Elected Over 35Year Period

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Table 11. 18Year Real Property 1
          15Year Real Property and LowIncome Housing 2
                                                                                Month Placed in Service
          Year                                                1–2                                 3–6                7–12
          1st                                                    3.0%                             2.0%               1.0%
          230th                                                 3.0                              3.0                3.0
          3135th                                                2.0                              2.0                2.0
          36th                                                   —                                1.0                2.0
1 Placed In Service After March 15 and Before June 23, 1984
2 Placed In Service Before May 9, 1985 
If Alternate ACRS Method Elected Over 35Year Period

Table 12. LowIncome Housing*
                                                                      Month Placed in Service
 Year     1                          2      3               4         5    6    7                     8    9    10   11   12
 1st      2.9%                       2.6%   2.4%            2.1%      1.9% 1.7%              1.4%     1.2% 1.0% 0.7% 0.5% 0.2%
 220th   2.9                        2.9    2.9             2.9       2.9  2.9               2.9      2.9  2.9  2.9  2.9  2.9
 2135th  2.8                        2.8    2.8             2.8       2.8  2.8               2.8      2.8  2.8  2.8  2.8  2.8
 36th     —                          0.3    0.5             0.8       1.0  1.2               1.5      1.7  1.9  2.2  2.4  2.7
* Placed In Service After May 8, 1985
 If Alternate ACRS Method Elected Over 35Year Period

Table 13. 19Year Real Property*
                                                                      Month Placed in Service
 Year     1                          2      3               4         5    6    7                     8    9    10   11   12
 1st      2.7%                       2.5%   2.3%            2.0%      1.8% 1.5%              1.3%     1.1% 0.8% 0.6% 0.4% 0.1%
 220th   2.9                        2.9    2.9             2.9       2.9  2.9               2.9      2.9  2.9  2.9  2.9  2.9
 2135th  2.8                        2.8    2.8             2.8       2.8  2.8               2.8      2.8  2.8  2.8  2.8  2.8
 36th     0.2                        0.4    0.6             0.9       1.1  1.4               1.6      1.8  2.1  2.3  2.5  2.8
* If Alternate ACRS Method Elected Over 35Year Period

Table 14. 18Year Real Property 1
          19Year Real Property 2
                                                                      Month Placed in Service
 Year     1                          2      3               4         5    6    7                     8    9    10   11   12
 1st      2.1%                       1.9%   1.8%            1.6%      1.4% 1.2% 1.0%                  0.8% 0.6% 0.5% 0.3% 0.1%
 211th   2.3                        2.3    2.3             2.3       2.3  2.3  2.3                   2.3  2.3  2.3  2.3  2.3
1245th   2.2                        2.2    2.2             2.2       2.2  2.2  2.2                   2.2  2.2  2.2  2.2  2.2
 46th     0.1                        0.3    0.4             0.6       0.8  1.0  1.2                   1.4  1.6  1.7  1.9  2.1
1 Placed In Service After June 22, 1984
2 If Alternate ACRS Method Elected Over a 45Year Period

Table 15. 18Year Real Property 1
          15Year Real Property and LowIncome Housing 2
                                                                      Month Placed in Service
 Year     1                          2      3               4         5    6    7                     8    9    10   11   12
 1st      2.3%                       2.0%   1.9%            1.7%      1.5% 1.3% 1.2%                  0.9% 0.7% 0.6% 0.4% 0.2%
 210th   2.3                        2.3    2.3             2.3       2.3  2.3  2.3                   2.3  2.3  2.3  2.3  2.3
1145th   2.2                        2.2    2.2             2.2       2.2  2.2  2.2                   2.2  2.2  2.2  2.2  2.2
 46th     —                          0.3    0.4             0.6       0.8  1.0  1.1                   1.4  1.6  1.7  1.9  2.1
1 Placed In Service After March 15 and Before June 23, 1984 
2 Placed In Service After December 31, 1980 
If Alternate ACRS Method Elected Over a 45Year Period

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Table 16. Listed Property Not Used Predominantly (Other Than 18 or 19 Year Real Property)
                                                                        Recovery Period
                Year                            5                            12                                                 25
                1st                            10.0%                           4.0%                                             2.0%
          2nd5th                              20.0                            9.0                                              4.0
                6th                            10.0                            8.0                                              4.0
          7th12th                             —                               8.0                                              4.0
              13th                             —                               4.0                                              4.0
        14th25th                              —                             —                                                  4.0
              26th                             —                             —                                                  2.0

Table 17. 40Year Recovery Period (For 18 or 19Year Listed Property Not Used Predominantly)
                                                    Month Placed in Service
Year            1         2        3      4         5          6        7         8        9       10                           11      12
1st             2.4%      2.2%     2.0%   1.8%      1.6%       1.4%     1.1%      0.9%     0.7%    0.5%                         0.3%    0.1%
240th          2.5       2.5      2.5    2.5       2.5        2.5      2.5       2.5      2.5     2.5                          2.5     2.5
41st            0.1       0.3      0.5    0.7       0.9        1.1      1.4       1.6      1.8     2.0                          2.2     2.4

Table 18. 3Year Recovery Property
                                        Tax year during the lease term that the business percentage decreases to 50% or less
Lease Term                       1            2                  3                 4               5                               6 and later
        1 Year                   3.00%
       2 Years                   6.00         1.25%
       3 Years                   10.20        6.20               2.25%
4 Years or more                  13.20       10.40               6.50              1.70%           0.50%                               0.00%

Table 19. 5Year Recovery Property
                                   Tax year during the lease term that the business percentage decreases to 50% or less
Lease Term                1        2    3        4         5        6        7        8       9        10                       11      12
        1 Year            2.7%
        2 Years           5.3      1.2%
        3 Years           9.9      6.1  1.6%
        4 Years           14.4   11.1   7.3      2.3%
        5 Years           18.4   15.7   12.4     8.2       3.0%
6 Years or more           21.8   19.6   16.7    13.5       9.6      5.25%    4.4%     3.6%    2.8%     1.8%                       1.0%  0%

Table 20. 10Year Recovery Property
                                        Tax year during the lease term that the business percentage decreases to 50% or less
Lease Term           1      2      3    4      5      6        7      8      9      10     11      12                       13      14      15
       1 Year        2.5%
2 Years              5.1    0.6%
3 Years              9.8    5.6    1.0%
4 Years              14.0   10.3   6.2  1.4%
5 Years              17.9   14.5   10.9 6.7    1.8%

6 Years              21.3   18.3   15.1 11.4   7.1    2.1%
7 Years              21.9   19.0   15.9 12.4   8.4    3.9      2.4%
8 Years              22.4   19.6   16.7 13.4   9.7    5.5      4.5    2.7%
9 Years              22.9   20.2   17.4 14.3  10.9    7.0      6.4    5.1    3.0%
10 Years             23.5   20.9   18.2 15.2  11.9    8.3      8.1    7.2    5.7     3.3%

11 Years             23.9   21.4   18.8 16.0  12.8    9.3      9.4    8.9    7.7     5.9   3.1%
12 Years             24.3   21.9   19.3 16.5  13.4    10.1   10.3     10.0   9.3     7.8   5.5     2.9%
13 Years             24.7   22.2   19.7 16.9  14.0    10.7   11.1     11.0  10.4     9.2   7.4     5.2                      2.7%
14 Years             25.0   22.5   20.1 17.3  14.4    11.1   11.6     11.7  11.3    10.3   8.8     6.9                      4.8    2.5%
15 Years or more     25.3   22.8   20.3 17.5  14.7    11.5   12.0     12.2  11.9    11.1   9.8     8.2                      6.5     4.5 2.3%

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                   To help us develop a more useful index, please let us know if you have ideas for index entries.
Index              See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.
 
                                                             Predominant use test 10   Publications (See Tax help)
A                               D                            Qualified business use 11
                                                             Recordkeeping   12
Accelerated cost recovery       Declining balance method 8   Related person  11        R
  system (ACRS):                Deduction:                   Reporting on Form 4562 13 Recapture:
Accelerated cost recovery         ACRS 3                     Use by employee   11       Depreciation  6
  system (ACRS):                  How to figure 7
  Alternate method 4            Dispositions   6 9,                                     Excess depreciation, listed 
  Classes of recovery                                                                   property      11
  property    3                                            M                           Recordkeeping:
  Deduction, short tax year 6   I                          Methods of figuring          For listed property              12
                                                             depreciation  8
  Defined 2                     Identity theft 14            ACRS 3
  Recovery periods 4
  Dispositions 6                Income forecast method 8     Declining Balance 8       S
  Unadjusted basis 3                                         Income forecast 8         Salvage value  7
Assistance (See Tax help)                                    Straight line 8           Straight line method              8
                                L
                                Listed property 10
B                               Listed property:           P                           T
                                  5% owner   11            Passenger automobile:       Tax help 13
Basis:                            Computers, related         Defined 10
  Adjusted  7                     equipment      10        Predominant use test, 
  Unadjusted, ACRS  3             Defined 10                 applying   11
                                  Entertainment use 11     Property:                   U
                                  Leased  12                 ACRS 2                    Useful life 7
C                                 Other transportation       Intangible 7
Changing methods   8              property     10

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