Major changes to Publications 534 and 946. This publication, as well as Publication 946,How To Depreciate Property, has been changed. Publication 534 has been shortened. It no longer contains general information on MACRS and the section 179 deduction. It contains a discussion of the accelerated cost recovery system (ACRS), the ACRS Percentage Tables, a discussion of other methods of depreciation, and a limited discussion of listed property. We expanded Publication 946 by adding material taken from Publication 534. We added more detail to the discussions of the section 179 deduction, the modified accelerated cost recovery system (MACRS), and listed property. We replaced the partialMACRS Percentage Tables with the complete ones from Publication 534. We also added the Table of Class Lives and Recovery Periods from Publication 534. We made these changes to eliminate most of the duplication that existed in the two publications. This will save money and make it easier for you to decide which publication you need. Use this publication to figure depreciation on property you placed in service before 1987; use Publication 946 to figure depreciation on property you placed in service after 1986.

The law allows you to recover your cost in business or income-producing property through yearly tax deductions. You do this by depreciating 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 intangible property, such as a copyright or a patent.

The amount you can deduct depends on:

This publication describes the kinds of property that can be depreciated and the methods used to figure depreciation on property placed in service before 1987. It is divided into three chapters and contains an appendix.