# ADS

Canonical URL: https://fundmyequipment.com/learn/glossary/ads-alternative-depreciation/
Last modified: 2026-05-29T19:39:17+00:00
Type: efin_glossary

## Summary

Alternative Depreciation System. A slower, straight-line depreciation method.

## Content

ADS (Alternative Depreciation System) is an alternative to MACRS that uses longer recovery periods and straight-line depreciation. ADS is required in certain situations and elected in others.
When ADS is required

Property used predominantly outside the United States
Property used in tax-exempt activities
Property financed with tax-exempt bonds
Property used by certain foreign-related entities
"Listed property" (vehicles, computers) when business use is 50% or less
Imported property from certain foreign trade restrictions

When ADS is elected (optional)
You can elect ADS for any property class even when not required. Once elected, ADS is irrevocable for that property.
Common reasons to elect ADS:

Smoothing out depreciation deductions across years
Matching book depreciation to tax depreciation
Avoiding alternative minimum tax (AMT) implications (though AMT depreciation rules have largely been aligned post-TCJA)
Slower recovery in low-tax-rate years (reserve deductions for higher-tax years)

ADS vs MACRS

ADS uses straight-line method (equal deduction each year)
ADS has longer recovery periods for most classes
MACRS uses 200% or 150% declining balance (front-loaded deductions)

Example: 5-year property
$100,000 equipment, 5-year MACRS class:

MACRS (200% DB): Year 1 $20K, Year 2 $32K, Year 3 $19.2K, Year 4 $11.5K, Year 5 $11.5K, Year 6 $5.8K
ADS (straight-line over 5 years): Year 1 $10K (half-year), Year 2-5 $20K each, Year 6 $10K (half-year)

Total deduction is the same; the timing differs significantly.