Rev. Proc. 87-57

The facts

Companion procedure to Rev. Proc. 87-56. It explains how depreciation is computed under section 168: the MACRS methods, recovery periods, and conventions, including short tax year rules.

What it holds

Prescribes the mechanics of the MACRS depreciation computation and, in section 8, supplies the optional depreciation tables: year-by-year percentage rates applied to unadjusted basis for each combination of depreciation system, method, recovery period, and convention.

Background

The 1986 tax reform created MACRS, the modern depreciation system. The IRS then issued two companion procedures in 1987. Rev. Proc. 87-56 assigns assets to classes and recovery periods. Rev. Proc. 87-57 explains how the computation itself works under section 168.

Because it predates 1990, there is no standalone irs.gov PDF of the procedure. But it remains live authority: the regulation at 26 CFR 1.168(i)-4 cites it by name, and Rev. Proc. 2019-08 cites it for the optional tables.

What it established

The procedure prescribes the MACRS mechanics: which depreciation methods apply, how recovery periods run, and how the conventions work. Conventions are the timing rules for the first and last year, such as the half-year, mid-quarter, and mid-month conventions. It also covers short tax year situations.

Its most-used piece is section 8, the optional depreciation tables. Each table gives year-by-year percentage rates applied to the asset's unadjusted basis, with a separate table for each combination of depreciation system, method, recovery period, and convention. Multiply basis by the percentage and the year's deduction falls out.

How it shows up in a study

Every depreciation schedule and savings projection a study produces runs on these mechanics. Once a study assigns an asset to 5, 7, or 15-year property, the dollars per year come from the methods, conventions, and table percentages this procedure prescribed.

It also explains results that surprise owners, like why a December placed-in-service date can trigger the mid-quarter convention and shift first-year deductions. The study's projections follow these rules, so the numbers tie to what tax software will compute and what an examiner will recompute.

What it does not mean

This procedure does not classify anything. Whether an asset is 5-year or 39-year is Rev. Proc. 87-56's job, plus the statute and the case law. Citing 87-57 supports the math, not the classification call.

The tables are also optional. A taxpayer can compute depreciation directly under section 168 instead. And the table percentages are the baseline mechanics; separate provisions, like bonus depreciation under section 168(k), change the first-year picture under their own rules.

Category

Methodology & procedure

Applies to

All property types

Status

Vetted

This page explains a tax authority in plain words. It is not tax advice for your situation. The way this authority applies to your property is reviewed by a licensed tax professional. Citation is provided so you or your advisor can read the primary source.