IRS Publication 946 – If you own business assets—computers, vehicles, machinery, office furniture, or rental property—IRS Publication 946 is your official roadmap to claiming depreciation deductions legally and maximizing your tax savings. This free IRS guide (Publication 946, 2024 edition) explains exactly how to recover the cost of income-producing property over time through depreciation, Section 179 expensing, and bonus depreciation.
Download the latest PDF directly from the IRS:
https://www.irs.gov/pub/irs-pdf/p946.pdf
What Is Depreciation and Why Does Publication 946 Matter?
Depreciation lets you deduct a portion of the cost of tangible and certain intangible property used in your trade or business or held for the production of income. You cannot deduct the entire cost in the year you buy it (unless you qualify for Section 179 or bonus depreciation). Instead, you spread the deduction over the property’s recovery period.
Publication 946 covers:
- Who can depreciate property
- What qualifies (and what doesn’t)
- All allowable depreciation methods
- Special rules for listed property (cars, trucks, computers used <50% for business)
- How to report everything on Form 4562
Key Updates for 2025 (and 2024 Rules Still Apply)
The 2024 edition of Pub 946 includes explicit “What’s New for 2025” guidance:
- Section 179 deduction limit → $1,250,000 (up from $1,220,000 in 2024)
- Phase-out threshold → $3,130,000 (up from $3,050,000)
- SUV limit → $31,300 (up from $30,500)
- Bonus depreciation (special depreciation allowance) → drops to 40% for most qualified property placed in service after Dec. 31, 2024 and before Jan. 1, 2026 (60% for certain long-production-period property and aircraft).
- New 5-year property classes added for certain energy storage technology, qualified facilities, and specified plants bearing fruits/nuts.
Always check IRS.gov/Pub946 for any legislation enacted after publication.
Property That Can (and Cannot) Be Depreciated
Qualifying property must meet all five tests:
- Owned by you (or you retain certain ownership incidents in a lease)
- Used in business or income-producing activity
- Has a determinable useful life >1 year
- Expected to last >1 year
- Not inventory or property placed in service and disposed of in the same year
Examples
- Office furniture, computers, machinery, vehicles, buildings (but not land)
- Qualified improvements to nonresidential real property
- Certain intangibles (off-the-shelf software, patents, copyrights)
Non-depreciable
- Land, inventory, property used for personal purposes, property with indefinite life
Depreciation Systems and Methods in Pub 946
The IRS uses the Modified Accelerated Cost Recovery System (MACRS) for property placed in service after 1986.
1. General Depreciation System (GDS) – Most Common
- Accelerated methods (200% or 150% declining balance switching to straight line)
- Shorter recovery periods
2. Alternative Depreciation System (ADS)
- Straight-line only
- Longer recovery periods
- Required for: tax-exempt use property, foreign-use property, listed property used ≤50% for business, or if you elect ADS
Recovery Periods (Common Examples)
| Property Type | GDS Recovery Period | ADS Recovery Period |
|---|---|---|
| Computers & peripheral equipment | 5 years | 5 years |
| Automobiles, light trucks | 5 years | 5 years |
| Office furniture & fixtures | 7 years | 10 years |
| Nonresidential real property | 39 years | 40 years |
| Residential rental property | 27.5 years | 40 years |
| Land improvements | 15 years | 20 years |
Conventions That Affect Your First-Year Deduction
- Half-year convention (default for most GDS property) → treats all property as placed in service in the middle of the year
- Mid-quarter convention → triggered if >40% of the depreciable basis of property is placed in service in the last quarter
- Mid-month convention → required for real property
Section 179 Expensing vs. Bonus Depreciation vs. Regular MACRS
Publication 946 clearly explains the three main ways to accelerate deductions:
| Feature | Section 179 | Bonus Depreciation | Regular MACRS |
|---|---|---|---|
| Immediate expensing | Up to $1,250,000 (2025) | 40% (2025) of remaining basis | Spread over recovery period |
| Qualifying property | Tangible personal property, certain real property improvements, qualified software | New/used qualified MACRS property with ≤20-year life | Almost any depreciable business asset |
| Income limitation | Yes (cannot exceed taxable income) | No | No |
| Recapture if business use drops | Yes (if ≤50%) | Yes | Yes (on sale or use change) |
You can combine them: elect Section 179 first, then bonus on the remainder, then regular MACRS on what’s left.
Listed Property Rules (Cars, Trucks, Computers)
If business use ≤50%, you must use ADS straight-line and keep strict records (mileage logs, etc.). Passenger automobile depreciation limits for 2024 (still relevant for 2025 returns) start at approximately $20,400 in Year 1 with bonus, but vary by vehicle type and year placed in service.
How to Report Depreciation?
File Form 4562 with your tax return if you:
- Claim Section 179 or bonus depreciation
- Claim depreciation on listed property
- Have any new assets placed in service
Common Mistakes to Avoid
- Forgetting mid-quarter convention when >40% of assets go in service in Q4
- Depreciating land
- Mixing up GDS vs. ADS for listed property
- Failing to recapture Section 179 or bonus when business use drops below 50%
- Not keeping adequate records for passenger automobiles
Bottom Line: Use Publication 946 to Save Thousands Legally
Whether you’re a small business owner, real estate investor, or self-employed professional, IRS Publication 946 gives you the exact rules, tables, worksheets, and examples you need to calculate depreciation correctly and defend your deductions in an audit.
Action steps today:
- Download the PDF: https://www.irs.gov/pub/irs-pdf/p946.pdf
- Review Chapter 2 (Section 179) and Chapter 3 (Bonus Depreciation) for your situation
- Use the MACRS percentage tables in Appendix A
- Consult a tax professional or use tax software that references the latest Pub 946
For the absolute latest updates after February 2026, always return to IRS.gov/Pub946. Depreciation rules change annually—stay compliant and keep more of your hard-earned money.