MF150 Depreciation

MACRS Formula 150 depreciation is similar to declining-balance depreciation. It uses the half-year averaging convention, and it switches to straight-line depreciation when the result is equal to or greater than the declining-balance calculation.

The formula for calculating depreciation for personal property with the MF150 depreciation method is:

Year 1:

Acquisition Cost

Estimated Life

1.5

1 *

Annual Depr.

* In the placed-in-service year, MACRS personal property uses the half-year averaging convention, which allows a half-year's depreciation (provided that the midquarter convention does not apply).

Year 2 and later (until the switch to straight-line):

Acquisition Cost - Accumulated Depr.

Estimated Life

1.5

Annual Depr.

Here's an example:

Acquired Value:	$16,000
Recovery Period:	5 Years
Salvage Value:	$1,000
Placed-in-Service Date:	03/31/2021

Year 1:

$16,000

1.5

$2,400

Year 2:

16,000 - 2,400

1.5

$4,080

Year 3:

16,000 - 6,480

1.5

$2,856

Year 4:

16,000 - 9336

2.5

$2,665.60

Notice that in Year 4 the calculation switches to straight-line depreciation, using the following formula:

Acquisition Cost - Accumulated Depr.

Remaining Life

Annual Depr.

Because you have already taken 2 ½ years of depreciation, the remaining life is 2.5 years.

Year 5:

16,000 - 12,001.60

1.5

$2,665.60

Year 6:

16,000 - 14,667.20

0.5

$1,332.80

Year 6 is the last year of the asset's life. The asset receives only a half-year of depreciation because of the half-year averaging convention.

Note: When using the MACRS Formula depreciation method, you recover the asset's full acquisition value, unlike declining-balance depreciation, which does not recover the salvage value.