Macrs Depreciation Calculator

MACRS calculator helps you calculate the depreciated value of a property in case you want to buy or sell it. The Modified Accelerated Cost Recovery System, put simply, MACRS, is the main technique of devaluation for purposes of federal income tax in the U.S. to determine depreciation deductions. 

The MACRS system of devaluation enables larger depreciation deductions in the starting years when the property is new and lesser deductions in the later ownership years. 

Overview

MACRS is divided into two categories: The General Depreciation System (GDS) and Alternative Depreciation System (ADS)

Assets/Resources are clustered into property groups based on recovery time of 3, 5, 7, 10, 15, 20 and 25 years respectively.

On the other hand, when it comes to residential rental real estate and non-residential real property, it is divided in two classes: 27.5 years and 39 years that is, respectively. You can determine the MACRS depreciation for both non-residential real property and rental property with our depreciation calculator.

MACRS Formula and Calculation

The formula for MACRS depreciation has been given below:

\(\mathbf{Dy = dy × P}\)

Where,

Dy: stands for depreciation in year y,

P: stands for the original property price,

dy: stands for depreciation rate for year ‘y’, it depends on the cost recovery time of the property.

Note: the formula can differ due to different word choices to represent the input variables. 

How to use our MACRS Depreciation Calculator?

Calculating MACRS depreciation with our tool is easier than you think. All you have to do is input the variables required for the process of estimation.

Follow the simple steps shown below to go on with the calculation:

• Just input the original price of the property.
• Select the depreciation method whether it’s straight line or declining balance (200 percent or 150 percent decline)
• Property age.
• Percentage of property that is being used for business purposes.
• The convention of use for first year.
• The month and year when the property came in service.
• The year to calculate the depreciation expense for.
• Choose ‘yes’ or ‘no’ for round and whether you want a depreciation schedule or not. 

With all these calculations put in place, just click on the ‘calculate’ bar and get your results. 

Which property is depreciable

According to IRS Publication 946, there are significant differences between the depreciable and non-depreciable property. For instance, the land is non-depreciable because it is affected by a lot fewer variables than properties like buildings, houses, cars, electronics etc. 

It is because properties like electronics, houses and buildings can get damaged, worn and superseded with better quality while no such variables apply to land. For further information, you can refer to the MACRS depreciation table and other general MACRS tables from Pub 946 excerpts.

Publication 946 clearly defines the property which is depreciable: in that,

• It must have a useful life that can be estimated.
• It must be used in some way or the other for business-related purposes.
• It must last for at least a year.