Publication 946: How To Depreciate Property

This guide explains how to recover the cost of business or income-producing property by claiming deductions for depreciation using the Modified Accelerated Cost Recovery System (MACRS).

What is Publication 946?

The Internal Revenue Service (IRS) publishes Publication 946, "How To Depreciate Property," to guide taxpayers on claiming deductions for the gradual decline in value of business or income-producing property. This process, called depreciation, allows you to spread the cost of the property over its useful life.

What is Depreciation?

Depreciation allows businesses and individuals to deduct the cost of certain assets over their useful life, spreading the cost out over several tax years. This reflects the gradual wear and tear, obsolescence, or decline in value of the property over time.

What does Publication 946 provides?

  • Guidance on determining which depreciation method applies to your property.
  • Information on necessary details such as recovery class, placed-in-service date, and basis (original cost).
  • Instructions on using the mid-month convention, a common approach for calculating depreciation deductions.
  • Explanation of depreciation recapture, which may occur when you sell or dispose of the property.