Introduction

This chapter discusses the Modified Accelerated Cost Recovery System (MACRS). It contains the following sections.

• MACRS Defined. This section defines MACRS. It discusses both MACRS systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS).
• What Can Be Depreciated Under MACRS. This section identifies what you can depreciate under MACRS, when to use GDS, and when to use ADS.
• What Cannot Be Depreciated Under MACRS. This section identifies property you cannot depreciate under MACRS.
• Election To Exclude Property From MACRS. This section explains how you make an election to exclude certain property from MACRS.
• How To Figure the Deduction Using Percentage Tables. This section discusses how to figure your MACRS deduction using the MACRS percentage tables. It explains basis, property classes and recovery periods, placed-in-service date, conventions, depreciation methods, and the MACRS percentage tables. It provides examples and contains a MACRS Worksheet to help you prepare Form 4562.
• How To Figure the Deduction Without Using the Tables. This section explains how you can figure your MACRS deduction without using the rates in the percentage tables. It discusses the various depreciation methods you can use. Further, it discusses conventions and how to apply them. This section contains numerous examples employing different depreciation methods. Lastly, it discusses how you can take a MACRS deduction in a short tax year.
• Dispositions. This section discusses how you depreciate property in the year of disposition if you dispose of it before the end of the recovery period. It discusses the different ways of figuring depreciation depending on the convention you used. This section also briefly discusses depreciation recapture.
• General Asset Account. This section discusses how you depreciate property in a general asset account. It also tells you how to group assets that you place in a general asset account. Also included in this section is a discussion on how you treat property in a general asset account when you transfer ownership or permanently withdraw it from use in your trade or business or from the production of income. Finally, this section discusses how you make the election to use a general asset account.

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