MF200 Depreciation
MACRS Formula 200 depreciation is similar to declining-balance depreciation. It uses the half-year averaging convention (if the midquarter convention does not apply), 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 MF200 depreciation method is:
Year 1:
|
Acquisition Cost Estimated Life |
X |
2 |
X |
1 * 2 |
= |
Annual Depr. |
* In the placed-in-service year, MACRS personal property uses the half-year averaging convention, which allows a half-year's depreciation in the year of acquisition (provided that the midquarter convention does not apply).
Year 2 and later (until the switch to straight-line):
|
Acquisition Cost - Accumulated Depr. Estimated Life |
X |
2 |
= |
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 5 |
X |
2 |
X |
1 2 |
= |
$3,200 |
Year 2:
|
16,000 - 3,200 5 |
X |
2 |
= |
$5,120 |
Year 3:
|
16,000 - 8,320 5 |
X |
2 |
= |
$3,072 |
Year 4:
|
16,000 - 11,392 5 |
X |
2 |
= |
$1,843.20 |
Year 5:
|
16,000 - 13,235.20 1.5 |
= |
$1,843.20 |
Notice that in Year 5 the calculation switches to straight-line depreciation, using the following formula:
|
Acquisition Cost - Accumulated Depr. Remaining Life |
= |
Annual Depr. |
Because you have already taken 3 ½ years of depreciation, the remaining life is 1.5 years.
Year 6:
|
10,000 - 15,078.40 0.5 |
X |
1 2 |
= |
$921.60 |
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.