# MACRS for computers and servers

Computers are 5-year property. Under the half-year convention, MACRS deducts 20%, 32%, 19.2%, 11.52%, 11.52%, 5.76% of the cost over six tax years. General information, not tax advice. Talk to your tax advisor about your situation.

## 5-year property, by convention

Percent of the basis left for MACRS, after section 179 and bonus.

| Year | Half-year | Mid-quarter Q1 | Q2 | Q3 | Q4 |
| --- | --- | --- | --- | --- | --- |
| 1 | 20.00% | 35.00% | 25.00% | 15.00% | 5.00% |
| 2 | 32.00% | 26.00% | 30.00% | 34.00% | 38.00% |
| 3 | 19.20% | 15.60% | 18.00% | 20.40% | 22.80% |
| 4 | 11.52% | 11.01% | 11.37% | 12.24% | 13.68% |
| 5 | 11.52% | 11.01% | 11.37% | 11.30% | 10.94% |
| 6 | 5.76% | 1.38% | 4.26% | 7.06% | 9.58% |

[Publication 946, Appendix A](https://www.irs.gov/pub/irs-pdf/p946.pdf), Tables A-1 (half-year) and A-2 to A-5 (mid-quarter, by quarter placed in service).

## How MACRS treats servers

Computers are qualified technological equipment. [IRC 168(e)(3)(B)(iv) and 168(i)(2)](https://www.law.cornell.edu/uscode/text/26/168) put any computer or peripheral equipment in the 5-year class. A computer is a programmable, electronically activated device with a central processing unit; peripheral equipment is any auxiliary machine run by it. Publication 946 lists them as asset class 00.12: a 6-year class life and a 5-year recovery period.

200% declining balance, then straight line. For 5-year property that is 40% a year on the remaining basis, switching to straight line when that gives more. The tables have the switch built in. You can elect the Alternative Depreciation System (straight line) instead, for a whole class for the year, and the election cannot be revoked.

A late-year cluster changes the convention. Half-year is the default. If more than 40% of the basis you placed in service that year went in during the last three months, every asset that year uses mid-quarter, measured after section 179 and before bonus. A cluster that goes live in November as the year's main purchase deducts 5.00% of its MACRS basis in year one instead of 20.00%.

The year you sell gets part of a year. Under half-year, half the table amount; under mid-quarter, the full-year amount times the share of the year up to the middle of the quarter you sell in. A sale can also bring back depreciation as income ([depreciation recapture](https://managedgpus.com/guides/accelerated-depreciation/depreciation-recapture)). The [MACRS calculator](https://managedgpus.com/macrs-depreciation-calculator) runs all five tables.

## Other data center assets

| Asset | Recovery period |
| --- | --- |
| Computers and peripheral equipment | 5 years |
| Office furniture and fixtures (asset class 00.11) | 7 years |
| Property with no class life | 7 years |
| Qualified improvement property (after 2017) | 15 years |
| Buildings (nonresidential real property) | 39 years |

[Publication 946](https://www.irs.gov/publications/p946), chapter 4 and Table B-1. Whether power and cooling equipment is personal property or part of the building is a cost segregation question.

## Table A-1, half-year convention

| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
| --- | --- | --- | --- | --- | --- | --- |
| 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% |
| 2 | 44.45% | 32.00% | 24.49% | 18.00% | 9.50% | 7.219% |
| 3 | 14.81% | 19.20% | 17.49% | 14.40% | 8.55% | 6.677% |
| 4 | 7.41% | 11.52% | 12.49% | 11.52% | 7.70% | 6.177% |
| 5 |  | 11.52% | 8.93% | 9.22% | 6.93% | 5.713% |
| 6 |  | 5.76% | 8.92% | 7.37% | 6.23% | 5.285% |
| 7 |  |  | 8.93% | 6.55% | 5.90% | 4.888% |
| 8 |  |  | 4.46% | 6.55% | 5.90% | 4.522% |
| 9 |  |  |  | 6.56% | 5.91% | 4.462% |
| 10 |  |  |  | 6.55% | 5.90% | 4.461% |
| 11 |  |  |  | 3.28% | 5.91% | 4.462% |
| 12 |  |  |  |  | 5.90% | 4.461% |
| 13 |  |  |  |  | 5.91% | 4.462% |
| 14 |  |  |  |  | 5.90% | 4.461% |
| 15 |  |  |  |  | 5.91% | 4.462% |
| 16 |  |  |  |  | 2.95% | 4.461% |
| 17 |  |  |  |  |  | 4.462% |
| 18 |  |  |  |  |  | 4.461% |
| 19 |  |  |  |  |  | 4.462% |
| 20 |  |  |  |  |  | 4.461% |
| 21 |  |  |  |  |  | 2.231% |

[Publication 946, Appendix A](https://www.irs.gov/pub/irs-pdf/p946.pdf). Book lives in financial statements are a separate question ([book vs tax](https://managedgpus.com/guides/accelerated-depreciation/book-vs-tax-depreciation)); the other rules are in the [accelerated depreciation guides](https://managedgpus.com/guides/accelerated-depreciation).

## Questions about MACRS

**Is a server 5-year or 7-year property?**

A computer is 5-year property, and the statute defines a computer broadly. Equipment that is an integral part of other property that is not a computer is excluded, and 7 years is the default for property with no class life. How a specific server is classified is a question for your tax advisor.

## Planning to buy GPU servers?

- A call with our CTO about what you need
- Ballpark costs and timelines for your budget
- A straight answer if it’s not a fit

Prefer email? [hello@amcompute.com](mailto:hello@amcompute.com)

## Want to own GPU servers? We'll run them.

[Plan a deployment](https://managedgpus.com/guides/accelerated-depreciation/macrs-computer-equipment#discuss)

Source: https://managedgpus.com/guides/accelerated-depreciation/macrs-computer-equipment