MACRS Table Example

A firm places into service an industrial lathe with an estimated life of 7 years and a total acquisition value of $100,000.00. They place the property in service in March 2007. The company operates on a calendar year-end, and the midquarter convention applies.

The system uses the following depreciation rates, taken from the IRS Table 2, General Depreciation System:

Year	Depreciation Rate (%)	Basis ($)	Recovery ($)
2007	25.00	100,000	25,000.00
2008	21.43	100,000	21,430.00
2009	15.31	100,000	15,310.00
2010	10.93	100,000	10,930.00
2011	8.75	100,000	8,750.00
2012	8.74	100,000	8,740.00
2013	8.75	100,000	8,750.00
2014	1.09	100,000	1,090.00
	100.00		100,000.00

 

The system calculates depreciation by determining an asset's basis and multiplying it by that year's depreciation rate. Note that the midquarter convention adjustment is already taken into consideration within the IRS tables.

Consider the calculation that would have been performed under the MACRS formula method for the year 2008:

($100,000 - 25,000) x (1/7 x 200%) = $21,428.57

Note that there is a slight rounding difference between the two calculations ($21,430.00 vs. $21,428.57). Either calculation is acceptable for tax reporting.