MACRS Table Calculation

The MACRS recovery allowance under the table method is essentially equivalent to the allowance under the formula method. As with the MACRS formula calculation, the MACRS table calculation allows you to recover personal property over its estimated life at a rate of 200% (declining balance) with a switch to straight-line at the optimal point. Unlike the formula method, with the table method the system computes depreciation by applying different depreciation rates to a constant property basis over the life of the asset.

You generally use the 200% declining-balance method to depreciate personal property with recovery periods of 3, 5, 7, or 10 years, while you use the 150% declining-balance method for 15- or 20-year property. Instead of using the 200% declining-balance method for personal property, you can elect to use a slower 150% rate. You can elect to use the 150% rate either over the GDS life, for property placed in service after 12/31/98, or over the longer ADS life, for property placed in service before 1/1/99. (The change in the recovery period used for this election was due to the IRS Restructuring and Reform Act of 1998.) The election to use the 150% rate can be helpful in eliminating the degree of exposure to the Alternative Minimum Tax (AMT). While the system does not support every possible ADS life when electing the 150% rate for pre-1999 property, it does support a number of the most regularly used ones. For unusual assets with unusual ADS lives, a MACRS formula calculation allows for more flexibility in meeting the slower rate, longer-life option.

For real property, the MACRS table calculation allows recovery at a straight-line rate over the recovery period. Generally, a either a 31.5-year or a 39-year estimated life is used for nonresidential real property (depending on when you placed it in service) and 27.5 years for residential property. Other valid estimated lives include 7, 10, 15, and 20 years. The tables use a 200% declining balance for 7- and 10-year lives and 150% declining balance for 15- and 20-year lives, regardless of whether the property type is real or personal.

Note: When an asset's depreciable life includes a short year, the MACRS table method cannot be used. The system handles this for you. If you have selected a MACRS table method and there are short years during the asset's depreciable life, the system uses the MACRS formula method instead.