IRS Publication 946, explained for real estate owners
What the IRS's depreciation handbook covers, the rules that apply to rental and commercial buildings, and the three MACRS percentage tables real estate owners look up most: Table A-6 (27.5-year), Table A-7a (39-year) and Table A-1 (5-, 7- and 15-year property).
IRS Publication 946, How To Depreciate Property, is the IRS's guide to recovering the cost of business and income-producing property: what can be depreciated, the section 179 deduction, bonus (special) depreciation, the MACRS recovery periods and conventions, and the percentage tables in Appendix A. It is written for anyone who claims depreciation, including landlords and commercial property owners, and their tax preparers. The IRS issues it every year; this page was checked against Publication 946 (2025), dated March 13, 2026 (PDF).
What is in Publication 946: the chapter map
Pub 946 runs to more than 100 pages, most of which a real estate owner never needs. Five chapters carry the rules; the appendices carry the tables.
| Part | What it covers | Why a property owner cares |
|---|---|---|
| Ch. 1, Overview of Depreciation | What can and cannot be depreciated, basis, placed in service, when depreciation ends | Land is never depreciable; the building is |
| Ch. 2, Electing the Section 179 Deduction | Expensing qualifying property in the year it is placed in service, with dollar limits | Property used mainly for lodging is generally excluded; some nonresidential improvements qualify |
| Ch. 3, Claiming a Special Depreciation Allowance | Bonus depreciation: which property qualifies and at what rate | Applies to 5-, 7- and 15-year property, not to the building itself |
| Ch. 4, Figuring Depreciation Under MACRS | Property classes, recovery periods, GDS and ADS, conventions, methods, the tables | The 27.5- and 39-year rules and the mid-month convention live here |
| Ch. 5, Additional Rules for Listed Property | Cars and other property with personal use; the business-use test | Mostly vehicles; rarely the building |
| Appendix A | MACRS percentage tables (A-1 to A-20) | Tables A-1, A-6 and A-7a, reproduced below |
| Appendix B | Table of class lives and recovery periods (Tables B-1 and B-2) | Asset classes such as 00.3 (land improvements) and 57.0 |
The rules for buildings: 27.5 and 39 years
Chapter 4 sorts a building into one of two classes. Residential rental property is a building or structure where at least 80% of gross rental income for the year comes from dwelling units; it is recovered over 27.5 years. A unit in a hotel, motel or other establishment where more than half the units are used on a transient basis is not a dwelling unit for this test. Nonresidential real property, such as an office building, store or warehouse, is recovered over 39 years (31.5 years if it was placed in service before May 13, 1993, which is Table A-7).
Both classes use the straight-line method and the mid-month convention: the building is treated as placed in service in the middle of the month, whatever the actual day. A rental placed in service on March 2 or March 30 gets the same nine and a half months in year 1. That half month comes back at the end, which is why a 27.5-year schedule runs across 29 tax years for property placed in service from July to December.
Land is never depreciated. Pub 946 is direct about it: land does not wear out, become obsolete or get used up. The purchase price has to be split between land and building before any table is applied, and only the building's share (plus capitalized closing costs and improvements allocated to it) goes into the depreciation base. Pub 527 explains the common ways to make that split.
Shorter lives: 5-, 7- and 15-year property
Not everything you buy with a building is "the building." Pub 946 puts several kinds of property that often come with real estate into shorter classes, and Appendix B gives the asset class that decides each life:
| Class | Typical real estate examples | Where Pub 946 puts it | ADS |
|---|---|---|---|
| 5-year | Appliances, carpets and furniture used in a residential rental activity | Ch. 4, 5-year property list | 9 yrs |
| 5-year | Personal property used in retail, wholesale and personal or professional services | Table B-2, asset class 57.0 (class life 9) | 9 yrs |
| 7-year | Office furniture, fixtures and equipment that are not structural components | Table B-1, asset class 00.11 (class life 10) | 10 yrs |
| 15-year | Land improvements: sidewalks, roads, fences, drainage, landscaping shrubbery | Table B-1, asset class 00.3 (class life 20) | 20 yrs |
| 15-year | Qualified improvement property: interior improvements you make to a nonresidential building after it was first placed in service (not enlargements, elevators, escalators or internal structural framework) | Ch. 4, 15-year property list | 20 yrs |
The ADS column for 5-year rental-activity property follows its class life under asset class 57.0; your preparer confirms the class for each item. More on what counts as a land improvement: land improvements and their 15-year life.
These classes use the half-year convention (Table A-1) unless more than 40% of the year's personal property was placed in service in the last quarter, in which case the mid-quarter tables apply. Under GDS, 5- and 7-year property use the 200% declining balance method and 15-year property uses 150% declining balance, each switching to straight line when that gives a larger deduction. The tables have the switch built in.
GDS vs ADS
MACRS has two systems. The General Depreciation System (GDS) is the default and gives the recovery periods above. The Alternative Depreciation System (ADS) uses longer, straight-line periods: 30 years for residential rental property placed in service after 2017, 40 years for nonresidential real property, and the class life for most other property. ADS is required in some cases, for example for property used mostly outside the United States, tax-exempt use property, and the real estate of a business that elects out of the business interest limit. It can also be elected. Property that must use ADS cannot take bonus depreciation.
Bonus depreciation in the current edition
The 27.5- and 39-year building itself never takes bonus depreciation. The 5-, 7- and 15-year property does. Under the One Big Beautiful Bill Act, 100% bonus depreciation is permanent for qualified property both acquired and placed in service after January 19, 2025. Property acquired on or before that date stays under the prior phase-down: 40% when placed in service in 2025 and 20% in 2026. Publication 946 (2025) also notes an election to take 40% instead of 100% for the first tax year ending after January 19, 2025. See the bonus depreciation hub for the rates by year and state conformity.
Table A-6: residential rental property, 27.5 years
Mid-month convention, straight line over 27.5 years. Find the month the property was placed in service; multiply the building's unadjusted basis by the year-1 rate, then by the full-year rate for each following year. Figures are as printed in Publication 946 (2025), Appendix A.
| Month | Year 1 | Years 2–27 | Final year |
|---|---|---|---|
| Jan | 3.485% | 3.636%* | Yr 28: 1.970% |
| Feb | 3.182% | 3.636%* | Yr 28: 2.273% |
| Mar | 2.879% | 3.636%* | Yr 28: 2.576% |
| Apr | 2.576% | 3.636%* | Yr 28: 2.879% |
| May | 2.273% | 3.636%* | Yr 28: 3.182% |
| Jun | 1.970% | 3.636%* | Yr 28: 3.485% |
| Jul | 1.667% | 3.636%* | Yr 29: 0.152% |
| Aug | 1.364% | 3.636%* | Yr 29: 0.455% |
| Sep | 1.061% | 3.636%* | Yr 29: 0.758% |
| Oct | 0.758% | 3.636%* | Yr 29: 1.061% |
| Nov | 0.455% | 3.636%* | Yr 29: 1.364% |
| Dec | 0.152% | 3.636%* | Yr 29: 1.667% |
* 3.636% in years 2–9; from year 10 the table alternates 3.636% and 3.637% so each column totals 100%. Property placed in service January to June finishes in year 28; July to December also takes the full rate in year 28 and finishes in year 29.
Show the full Table A-6, all 29 recovery years
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1 | 3.485% | 3.182% | 2.879% | 2.576% | 2.273% | 1.970% | 1.667% | 1.364% | 1.061% | 0.758% | 0.455% | 0.152% |
| 2–9 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 10 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 11 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 12 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 13 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 14 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 15 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 16 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 17 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 18 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 19 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 20 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 21 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 22 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 23 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 24 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 25 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 26 | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 27 | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% | 3.637% |
| 28 | 1.970% | 2.273% | 2.576% | 2.879% | 3.182% | 3.485% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% | 3.636% |
| 29 | 0.152% | 0.455% | 0.758% | 1.061% | 1.364% | 1.667% |
Skip the lookup. The rental property depreciation calculator takes your price, land value and month placed in service and prints the whole 27.5- or 39-year schedule. It computes the mid-month formula exactly rather than reading the rounded table, so its 39-year figures can differ from Table A-7a by a few thousandths of a percent.
Open the depreciation calculatorReading the table: a worked example
A rental house with $300,000 of building basis (land already removed) is placed in service in March. Table A-6 gives 2.879% for year 1, so the first-year deduction is $300,000 × 2.879% = $8,637. Each full year after that is $300,000 × 3.636% = $10,908. The rate always applies to the original unadjusted basis, not to what is left.
Table A-7a: nonresidential real property, 39 years
Mid-month convention, straight line over 39 years, for nonresidential real property placed in service after May 12, 1993. Figures as printed in Publication 946 (2025).
| Month | Year 1 | Years 2–39 | Year 40 |
|---|---|---|---|
| Jan | 2.461% | 2.564% | 0.107% |
| Feb | 2.247% | 2.564% | 0.321% |
| Mar | 2.033% | 2.564% | 0.535% |
| Apr | 1.819% | 2.564% | 0.749% |
| May | 1.605% | 2.564% | 0.963% |
| Jun | 1.391% | 2.564% | 1.177% |
| Jul | 1.177% | 2.564% | 1.391% |
| Aug | 0.963% | 2.564% | 1.605% |
| Sep | 0.749% | 2.564% | 1.819% |
| Oct | 0.535% | 2.564% | 2.033% |
| Nov | 0.321% | 2.564% | 2.247% |
| Dec | 0.107% | 2.564% | 2.461% |
The IRS builds this table from a rounded monthly step, so its year-1 figures run slightly above the exact formula (January: 2.461% printed, 2.457% exact). You can figure the deduction either way, but once you start using the tables for a property you must generally keep using them for its whole recovery period.
Table A-1: 5-, 7- and 15-year property (half-year convention)
The GDS rates for the shorter-lived property a cost segregation study separates out. Apply them to the unadjusted basis of each component (after any bonus depreciation). Columns for 3-, 10- and 20-year property are in the IRS table.
| Year | 5-year | 7-year | 15-year |
|---|---|---|---|
| 1 | 20.00% | 14.29% | 5.00% |
| 2 | 32.00% | 24.49% | 9.50% |
| 3 | 19.20% | 17.49% | 8.55% |
| 4 | 11.52% | 12.49% | 7.70% |
| 5 | 11.52% | 8.93% | 6.93% |
| 6 | 5.76% | 8.92% | 6.23% |
| 7 | 8.93% | 5.90% | |
| 8 | 4.46% | 5.90% | |
| 9 | 5.91% | ||
| 10 | 5.90% | ||
| 11 | 5.91% | ||
| 12 | 5.90% | ||
| 13 | 5.91% | ||
| 14 | 5.90% | ||
| 15 | 5.91% | ||
| 16 | 2.95% |
5- and 7-year: 200% declining balance. 15-year: 150% declining balance. Each switches to straight line, and the last year picks up the half year the first year left out.
What Publication 946 does not tell you
Pub 946 gives you the classes and the tables. It does not tell you how much of the price of your building belongs in each class. A purchase closes as one number. Left alone, everything except land goes into the 27.5- or 39-year line, including the appliances, flooring, cabinetry, dedicated electrical, site lighting, paving and landscaping that the classes above would recover in 5 or 15 years.
Splitting that one number into its components is what a cost segregation study does. The IRS sets out how it reviews a study in Publication 5653, the Cost Segregation Audit Techniques Guide: the methods it accepts, the documentation it expects, and how common building components are usually classified. Our methodology page explains how our studies follow it, and the audit-support page sets out what we provide if a study is examined. The court cases behind the practice are on the legal history page.
If the property was placed in service in an earlier year, the shorter lives can still be applied: the change goes through Form 3115 and a §481(a) catch-up rather than amended returns.
See what moves out of the 27.5- or 39-year line
Start with a free estimate of the Year-1 deduction for your property, then order a study when you are ready. Residential studies from $495; commercial studies from $995. Every study is quality-checked before delivery and comes with the depreciation schedules your CPA enters on Form 4562. Estimates are estimates, not tax advice.
Publication 946 questions
General information, not tax advice. Table values are reproduced from Publication 946 (2025) as of October 17, 2026; check the current edition on IRS.gov and confirm your property's classes and method with your CPA.
Primary authorities
- IRS Publication 946, How To Depreciate Property (PDF), Publication 946 (2025), dated March 13, 2026: chapters 1 to 5, Appendix A Tables A-1, A-6, A-7 and A-7a, Appendix B Tables B-1 and B-2
- IRS Publication 527, Residential Rental Property
- IRS Publication 5653, Cost Segregation Audit Techniques Guide
- 26 U.S.C. §168: accelerated cost recovery system, including §168(k) bonus depreciation
- IRS Form 4562, Depreciation and Amortization
Every source we cite is listed on our sources page. Further reading: the MACRS topic hub on irsdepreciationrules.com, our companion reference for federal depreciation rules.
Put the shorter lives to work.
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