MACRS Depreciation Method - Instructions for Schedule

Property Class Under GDS Class recovery period (Useful Life) 3-year Asset types Tractor units for over-the-road use. Any race horse over 2 years old when placed in service. (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age.) Any other horse (other than a race horse) over 12 years old when placed in service. Qualified rent-to-own property (defined in pub. 946). Automobiles, taxis, buses, and trucks. Computers and peripheral equipment. Office machinery (such as typewriters, calculators, and copiers). Any property used in research and experimentation. Breeding cattle and dairy cattle. Appliances, carpets, furniture, etc., used in a residential rental real estate activity. Certain geothermal, solar, and wind energy property. Office furniture and fixtures (such as desks, files, and safes). Agricultural machinery and equipment. Any property that does not have a class life and has not been designated by law as being in any other class. Certain motorsports entertainment complex property placed in service before January 1, 2012 (defined later). Any natural gas gathering line placed in service after April 11, 2005. See Natural gas gathering line, natural gas distribution line, and electric transmission property, later. Vessels, barges, tugs, and similar water transportation equipment. Any single purpose agricultural or horticultural structure. Any tree or vine bearing fruits or nuts. Qualified small electric meter and qualified smart electric grid system (defined in pub. 946) placed in service on or after October 3, 2008. Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). Any retail motor fuels outlet (defined in pub. 946), such as a convenience store. Any municipal wastewater treatment plant. Any qualified leasehold improvement property (defined in pub. 946) placed in service before January 1, 2012. Any qualified restaurant property (defined in pub. 946) placed in service before January 1, 2012. Initial clearing and grading land improvements for gas utility property. Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. See Natural gas gathering line, natural gas distribution line, and electric transmission property, later. Any natural gas distribution line placed in service after April 11, 2005. See Natural gas gathering line, natural gas distribution line, and electric transmission property, later. Any qualified retail improvement property placed in service before January 1, 2012. Farm buildings (other than single purpose agricultural or horticultural structures). Municipal sewers not classified as 25-year property. Initial clearing and grading land improvements for electric utility transmission and distribution plants.

5-year

7-year

10-year

15-year

20-year

MJC Revised 1/2012

Page 1

MACRS Depreciation Method - Instructions for Schedule
Property Class Under GDS Class recovery period (Useful Life) 27.5-year Asset types Residential rental property. This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. Nonresidential real property. This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27.5 years.

31.5-year

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Table A-1 from IRS Publication 946 (2010) Depreciation rate for recovery period (decimal format)
3-year 5-year 7-year 10-year 15-year 20-year

.3333 .4445 .1481 .0741

.2000 .3200 .1920 .1152 .1152 .0576

.1429 .2449 .1749 .1249 .0893 .0892 .0893 .0446

.1000 .1800 .1440 .1152 .0922 .0737 .0655 .0655 .0656 .0655 .0328

.0500 .0950 .0855 .0770 .0693 .0623 .0590 .0590 .0591 .0590 .0591 .0590 .0591 .0590 .0591 .0295

.03750 .07219 .06677 .06177 .05713 .05285 .04888 .04522 .04462 .04461 .04462 .04461 .04462 .04461 .04462 .04461 .04662 .04661 .04462 .04461 .02231

MJC Revised 1/2012

Page 2

MACRS Depreciation Method - Instructions for Schedule
Love Thy Pets Inc., Depreciation Schedule – MACRS For 5 Year Asset $20,000 5,000 5 Years
B Cost $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 C Depreciation Rate .2000 .3200 .1920 .1152 .1152 .0576 D Annual Depreciation Expense $4,000 $6,400 $3,840 $2,304 $2,304 $1,152 E Accumulated Depreciation $ 4,000 $10,400 $14,240 $16,544 $18,848 $20,000 F Book Value At end of year $16,000 $ 9,600 $ 5,760 $ 3,456 $ 1,152 $ 0

Cost of Asset Residual Value Useful Life
A End of year 1 2 3 4 5 6

Systematic Instructions Always start with the three-line header, which in this case includes the name of the corporation, the title of the form, and the assets useful life. 1. On the first line place the title “Cost of Asset” and then the dollar value of the asset. 2. On the second line place the title “Residual Value” and the dollar value of the asset at the end of its useful life to the corporation. 3. On the third line place the title “Useful Life” and the amount of years the asset will be of value to the corporation. You can use the first two charts to determine what the useful life of the asset will be for the corporation. Please take note that an asset does not cease to exist just because it is no longer useful to the corporation. 4. On the fourth line label the columns alphabetically. 5. On the fifth line use the following labels:
Depreciation Rate Annual Depreciation Expense Accumulated Depreciation Book Value At end of year

End of year

Cost

MJC Revised 1/2012

Page 3

MACRS Depreciation Method - Instructions for Schedule
6. Column “A” list one more year than the assets useful life. This will result in six rows for an asset with a useful life of five years after the header. 7. Column “B” list the original cost of the asset in each row after the header for this column. 8. Column “C” copy the information from Table A-1 for the recovery year identify on line 3. 9. Column “D” multiply the cost of the asset column “B” by the depreciation rate column “C” to get the dollar value for the annual depreciation expense. 10. Column “E” ” is the sum total of all the annual depreciation taken up to the current period. The first year’s accumulated depreciation will be the same as the annual depreciation since no prior depreciation has been taken. Thereafter the current year’s depreciation will be added to the prior year’s accumulated depreciation to arrive at the current year’s accumulated depreciation. Unlike the other forms of depreciation residual value is not taken into consideration when using the MARCS method of depreciation. 11. Column “F” is arrived at by subtracting the value in column “E” accumulated depreciation from the value in column “B” which is the cost of the asset. Note that residual value is not considered when depreciation is taken using MACRS.

MJC Revised 1/2012

Page 4

Master your semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master your semester with Scribd & The New York Times

Cancel anytime.