MI200 Depreciation
The calculation for MACRS Indian Reservation property (Method MI200) is similar to the calculation for MF200, (MACRS formula). The only difference is that MACRS Method MI allows property to be depreciated over shorter recovery periods. Personal property in the 7-year property class (using MF200) would have a 4-year recovery period using MI200.
The formula for calculating depreciation for personal property with the MI200 depreciation method is:
Year 1:
|
Acquisition Cost |
X |
2 |
X |
1 * |
= |
Annual Depr. |
* MACRS Indian Reservation personal property uses the half-year averaging convention, which allows a half-year's depreciation in the year of acquisition and disposal (provided that the midquarter convention does not apply).
Year 2:
|
Acquisition Cost - Accumulated Depr. |
X |
2 |
= |
Annual Depr. |
Here's an example:
|
Acquired Value: |
$10,000 |
|
Recovery Period: |
4 Years |
Year 1:
|
$10,000 |
X |
2 |
X |
1
|
= |
$2,500 |
Year 2:
|
10,000 - 2,500 |
X |
2 |
= |
$3,750 |
Year 3:
|
10,000 - 6,250 |
X |
2 |
= |
$1,875 |
Year 4:
|
10,000 - 8,125 |
= |
$1,250 |
Notice that in Year 4 the calculation switches to straight-line depreciation, using the following formula:
|
Acquisition Cost - Accumulated Depr. |
= |
Annual Depr. |
Because you have already taken 2 ½ years of depreciation, the remaining life is 1.5 years.
Year 5:
|
10,000 - 8,125 |
X |
1
|
= |
$625 |
Notice that in Year 5 the calculation uses the same amount of Accumulated Depreciation and Remaining Life as was used in Year 4. These amounts remain the same for each year in the remaining life of the asset.
Year 5 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.