Modified Accelerated Cost Recovery System is a system used by the Internal Revenue Service to depreciate property. MACRS can only be used for property placed in service after 1987, except for property placed in service after July 31, 1986 if you elected MACRS at the time. In general, you must use MACRS to depreciate real property if you purchased it for personal use before 1987 but then changed it to business use after 1986.
1. Decide how long you want to use the property for. For example, you may have purchased last tax year a $20,000 automobile that you want to depreciate over five years.
2. Find your MACRS percentage in the table in Appendix A of IRS Publication 946 (IRS.gov). The five-year property table A-1 for property placed in service half way through the year shows year 1 is 20 percent.
3. Multiply the given depreciation by the cost of the property. In this example, the automobile cost $20,000 so: $20,000 x 0.2 = $4,000. This is the amount of depreciation you can take on your taxes for year 1.
- If you aren't sure which table to use in Appendix A, refer to Chart 1 or Chart 2 at the beginning of the appendix. Chart 1 lists which table you should use according to factors like in which quarter the item was placed in service and which depreciation method you use.
- MACRS cannot be used to depreciate intangible property, films, video tapes and recordings.
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