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Sam · Posted: Wed Apr 14, 2004 9:03 pm Post subject: MACRS

MACRS (Modified Accelerated Cost Recovery System) is a rule established by the Economic Recovery Tax Act in 1986 to provide an acceptable tax depreciation method.

Tax depreciation computation mirrored financial accounting depreciation as the cost of an asset (less reduction for estimated salvage value) and is written off over the estimated value of the asset.

It is also referred to as the General Depreciation System (GDS) and it applies to all tangible property placed in service after 1986.

MACRS provides three depreciation methods under GDS:

The 200% declining balance method: Applicable on 3, 5, 7 and 10 years old property. It provides a greater deduction during the earlier recovery periods.
The 150% declining balance method: Applicable on 3, 5, 7, 10, 15 and 20 years old property. It provides a greater deduction during the earlier recovery periods.
The straight line method: Applicable on 3, 5, 7, 10, 15 and 20 years old property, Non-residential real property, and residential rental property. It provides an equal early deduction (except for the first and last years).

Guest

I wanted to know residential rental property falls under which MACRS GDS property class.
Thanks
Peter Gabriel

Guest

Hi Peter,

Residential rental property will fall under the 27.5 year MACRS GDS property class.

But let me also tell you that this class does not include any kind of hotels and motels.

David

adonis · Posted: Wed Dec 20, 2006 9:22 pm Post subject:

Welcome Peter,

MACRS can be used to depreciate residential rental property. But personal property is not involved here.

Personal property is excluded from the MACRS if you or any person related to you or your tenant owned or used it in 1986.

However, property will not be excluded if the deduction for 2005 under MACRS is less than the deduction one has under the ACRS (Accelerated Cost Recovery System).

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