The Modified Accelerated Cost Recovery System (MACRS) is the U.S. tax depreciation system that companies use to deduct the cost of certain property. MACRS replaced the Accelerated Cost Recovery System (ACRS) in 1987.
This system allows businesses to recover the costs of their investments in certain depreciable assets over a specified period. MACRS generally requires property to be depreciated using an accelerated method, meaning larger deductions are taken in the earlier years of an asset's life.
Key Components:
Cost Basis: This is the initial amount invested in the asset, including purchase price and any costs to get the asset ready for its intended use.
Recovery Period: This is the number of years over which the asset's cost is depreciated. MACRS assigns specific recovery periods to different types of assets (e.g., 3-year property, 5-year property, 7-year property, etc.). Real property (like buildings) typically has longer recovery periods (27.5 years for residential rental, 39 years for non-residential).
Depreciation Method: MACRS prescribes specific depreciation methods based on the asset's recovery period and type. For most property (except real property), this is typically the 200% declining balance method, switching to the straight-line method when that yields a larger deduction. For real property, the straight-line method is used.
Convention: This determines how much depreciation can be claimed in the year the asset is placed in service and the year it is disposed of. Common conventions include:
Half-Year Convention: Assumes all property was placed in service (or disposed of) in the middle of the tax year, regardless of the actual date.
Mid-Quarter Convention: If more than 40% of the depreciable property is placed in service during the last quarter of the tax year, this convention applies to all property placed in service during the year. It assumes property is placed in service (or disposed of) in the middle of the quarter in which it was actually placed in service.
Modified Mid-Quarter Convention: Similar to mid-quarter, but assumes property is placed in service (or disposed of) halfway through the year if placed in service during the first half, and in the middle of the quarter if placed in service during the last half. This is a more complex convention.
Full-Month Convention: Assumes property was placed in service (or disposed of) on the first day of the month. This convention is generally used for real property.
How the Calculator Works (Simplified Logic):
This calculator uses IRS-published percentage tables for MACRS depreciation based on the selected recovery period and convention. The actual calculation involves looking up the appropriate percentage for each year and multiplying it by the asset's cost basis.
Note: The "Mid-Quarter" and "Modified Mid-Quarter" calculations can be complex and depend on the timing of asset acquisitions throughout the year. This calculator uses simplified lookups for common scenarios and does not account for the "more than 40%" rule for mid-quarter applicability or complex asset acquisition timings.
Example Calculation (Illustrative):
Let's say you purchase a piece of equipment with a cost basis of $100,000, it falls under the 5-year MACRS property class, and you use the Half-Year Convention.
Year 1: 20% of $100,000 = $20,000
Year 2: 32% of $100,000 = $32,000
Year 3: 19.20% of $100,000 = $19,200
Year 4: 11.52% of $100,000 = $11,520
Year 5: 11.52% of $100,000 = $11,520
Year 6: 5.76% of $100,000 = $5,760
The sum of these percentages (200% declining balance, switching to straight-line) reaches 100% by the end of year 6 due to the half-year convention in the first and last years.
Disclaimer:
This calculator is for informational purposes only and does not constitute tax advice. Consult with a qualified tax professional for advice specific to your situation. Tax laws and regulations are subject to change.
function calculateDepreciation() {
var costBasis = parseFloat(document.getElementById('assetCost').value);
var recoveryPeriod = document.getElementById('recoveryPeriod').value;
var convention = document.getElementById('convention').value;
var resultDiv = document.getElementById('result');
if (isNaN(costBasis) || costBasis <= 0) {
resultDiv.innerHTML = "Please enter a valid cost basis.";
return;
}
var depreciationYears = [];
var totalDepreciation = 0;
// Simplified MACRS Percentage Tables (IRS Pub 946 simplified)
// These are illustrative percentages and may not cover all nuances or conventions perfectly.
// Real property (27.5, 31.5, 39) uses straight-line, so percentages will differ.
var macrsPercentages = {
"3": {
"half-year": [0.3333, 0.4444, 0.1667, 0.0556], // Year 1, 2, 3, 4 (half year in Y1 and Y4)
"mid-quarter": [0.125, 0.375, 0.375, 0.125], // Y1-Y4 example for mid-quarter, actual calculation is complex.
"modified-mid-quarter": [0.125, 0.375, 0.375, 0.125], // Similar simplification for illustration
"full-month": [0.3333, 0.5000, 0.1667, 0.0000] // Simplified for 3-year, full-month isn't typical for personal property
},
"5": {
"half-year": [0.2000, 0.3200, 0.1920, 0.1152, 0.1152, 0.0576], // Y1-Y6
"mid-quarter": [0.100, 0.280, 0.192, 0.1152, 0.1152, 0.1976], // Example, actual depends on quarter
"modified-mid-quarter": [0.100, 0.280, 0.192, 0.1152, 0.1152, 0.1976], // Example
"full-month": [0.1667, 0.3333, 0.1999, 0.1167, 0.1167, 0.0667] // Simplified
},
"7": {
"half-year": [0.1429, 0.2449, 0.1749, 0.1249, 0.0893, 0.0892, 0.0893, 0.0447], // Y1-Y8
"mid-quarter": [0.071, 0.214, 0.175, 0.125, 0.089, 0.089, 0.089, 0.148], // Example
"modified-mid-quarter": [0.071, 0.214, 0.175, 0.125, 0.089, 0.089, 0.089, 0.148], // Example
"full-month": [0.1429, 0.2857, 0.1714, 0.1143, 0.0857, 0.0857, 0.0857, 0.0286] // Simplified
},
"10": {
"half-year": [0.1000, 0.1800, 0.1440, 0.1152, 0.0922, 0.0737, 0.0655, 0.0655, 0.0656, 0.0656, 0.0328], // Y1-Y11
"mid-quarter": [0.050, 0.150, 0.144, 0.115, 0.092, 0.074, 0.066, 0.066, 0.066, 0.066, 0.077], // Example
"modified-mid-quarter": [0.050, 0.150, 0.144, 0.115, 0.092, 0.074, 0.066, 0.066, 0.066, 0.066, 0.077], // Example
"full-month": [0.0833, 0.1667, 0.1400, 0.1117, 0.0900, 0.0750, 0.0667, 0.0667, 0.0667, 0.0667, 0.0333] // Simplified
},
"15": {
"half-year": [0.0667, 0.1333, 0.1070, 0.0913, 0.0819, 0.0759, 0.0703, 0.0655, 0.0614, 0.0577, 0.0544, 0.0514, 0.0487, 0.0462, 0.0440, 0.0220], // Y1-Y16
"mid-quarter": [0.033, 0.117, 0.107, 0.091, 0.082, 0.076, 0.070, 0.066, 0.061, 0.058, 0.054, 0.051, 0.049, 0.046, 0.044, 0.094], // Example
"modified-mid-quarter": [0.033, 0.117, 0.107, 0.091, 0.082, 0.076, 0.070, 0.066, 0.061, 0.058, 0.054, 0.051, 0.049, 0.046, 0.044, 0.094], // Example
"full-month": [0.0667, 0.1333, 0.1067, 0.0907, 0.0813, 0.0753, 0.0700, 0.0653, 0.0613, 0.0573, 0.0540, 0.0513, 0.0487, 0.0460, 0.0440, 0.0220] // Simplified
},
"20": { // Example for a longer period, simplified percentages
"half-year": [0.0500, 0.0950, 0.0855, 0.0760, 0.0665, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0571, 0.0285], // Y1-Y20
"full-month": [0.0417, 0.0833, 0.0750, 0.0667, 0.0583, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0500, 0.0250] // Simplified
},
"27.5": { // Residential Rental Property – Straight Line
"half-year": [0.0348, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0174], // Y1-Y27.5 (half Y1) – Percentage is (1/27.5) = 3.636…%
"full-month": [0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363, 0.0363] // Y1-Y27.5 (1/27.5 is approx 3.636%)
},
"39": { // Non-Residential Real Property – Straight Line
"half-year": [0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0128], // Y1-Y39 (half Y1) – Percentage is (1/39) = 2.564…%
"full-month": [0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256, 0.0256] // Y1-Y39 (1/39 is approx 2.564%)
}
};
var percentages = macrsPercentages[recoveryPeriod];
var yearlyDepreciation = [];
if (!percentages) {
resultDiv.innerHTML = "Selected recovery period is not supported or is for a different calculation method.";
return;
}
var annualPercentages = percentages[convention];
if (!annualPercentages) {
resultDiv.innerHTML = "Selected convention is not supported for this recovery period or requires more complex calculation.";
return;
}
// Determine the number of depreciation years based on the available percentages for the convention
var numDepreciationYears = annualPercentages.length;
for (var i = 0; i costBasis) {
currentYearDepreciation = costBasis – totalDepreciation;
}
// Ensure depreciation is not negative
currentYearDepreciation = Math.max(0, currentYearDepreciation);
yearlyDepreciation.push({
year: i + 1,
amount: currentYearDepreciation.toFixed(2)
});
totalDepreciation += currentYearDepreciation;
}
// Adjust for any remaining balance if the sum of percentages doesn't perfectly reach 100%
if (totalDepreciation 0) {
var lastYear = yearlyDepreciation[yearlyDepreciation.length – 1];
lastYear.amount = (parseFloat(lastYear.amount) + remainder).toFixed(2);
totalDepreciation = costBasis; // Ensure total matches cost basis
}
}
var resultHTML = "