MACRS stands for Modified Accelerated Cost Recovery System because it allows you to take a larger tax deduction in the early years of an asset and less in later years. However, you are able to deduct a portion of the cost each year using the MACRS depreciation method. For example, if you purchase a computer for $1500, you generally can’t deduct the entire $1500 in the same year that you purchase the computer. Rather, the IRS allows you to deduct only a portion of the cost each year over the number of years the asset is expected to last. When you purchase an asset for business (such as equipment, software, or even buildings), you typically cannot write off the entire cost of the asset in the year of purchase. MACRS is the primary depreciation method used for tax purposes. When most people think of depreciation, they think of getting a tax deduction. If you’d like to learn about other depreciation methods or want to learn more about how depreciation works in general, read our What is Depreciation? article. Click below to download our free ultimate guide to Macrs depreciation. Of course, like all things accounting, depreciation can be tricky and it’s impossible to remember all the intricate details. MACRS stands for “Modified Accelerated Cost Recovery System.” It is the primary depreciation methods for claiming a tax deduction.
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