Skip to main content

Legal

Tax & Accounting

Trade & Supply

Risk & Fraud

News & Media

Books

Developers

Calculation

MACRS / ACRS tax assumptions

Show all hidden content
Select any of the following links for information on MACRS/ACRS tax assumptions.
Tables vs. formula
  • If an asset with MACRS accelerated depreciation spans a short year, the application reverts to a formula-based calculation for that asset.
  • The application doesn’t use tables for the following methods:
    • MACRS 150%
    • ADS Life
    • MACRS SL Class Life
    • MACRS SL ADS Life
    It also doesn’t use tables for MACRS 27.5-year, 31.5-year, and 39-year real property. Rather, for these, the application always uses the formula.
  • Tables aren't used to calculate depreciation for components of aggregate assets created from a like-kind exchange. In the year of the exchange, bonus depreciation is calculated on the prior-year continuation component. A basis adjustment would then need to be made for the amount of bonus depreciation taken. MACRS tables aren't set up to take into account a basis adjustment during an asset's life. Therefore, the application always uses the formula for these aggregate assets.
  • No formula is available for regular ACRS accelerated percentages.
  • When using the formula for calculating ACRS optional straight-line method on luxury autos, the application ignores the half-year convention for years beyond the class life. For table calculations, the half-year convention is already built into the table rates. The 2 methods result in significantly different amounts of previous depreciation calculated for the years beyond the class life.
  • When calculating AMT for ACRS optional straight-line method, the application reverts to a formula-based calculation when the class life is greater than 3 years. This is because tables for ACRS optional straight line don’t exist for 8-, 15-, and 22-year periods.
  • Tables aren't used to calculate depreciation for components of aggregate assets that are created from like-kind exchanges following Reg. 1.168(i)-6. If tables are selected, the relinquished asset component will calculate using the formula calculation.
Prior depreciation
Regardless of whether the correct depreciation was taken in previous years, the application still calculates the correct current depreciation according to the method you specify. However, if you select MACRS accelerated depreciation based on the formulas rather than IRS tables, the current depreciation depends on the amount of previous depreciation taken. If the incorrect depreciation was taken in a previous year, the application doesn’t adjust the current depreciation so that the ending accumulated depreciation is correct. Also, if YTD depreciation is incorrect for monthly or quarterly periods, the application calculates an adjusted current-period depreciation so that YTD plus current depreciation yields the correct ending amount through the end of the current period. The current-period depreciation could be a negative amount in that case.
Limit ACRS/MACRS to life
If you don’t want to depreciate MACRS/ACRS assets beyond their asset lives, the
Setup
,
Options
,
Calculation
 tab gives an option to limit the depreciation automatically. 2 situations exist where the application doesn’t limit MACRS/ACRS assets even if you select automatic limit:
  1. When a client has a short year.
  2. When an asset is a luxury auto.

error-icon

Triva isn't available right now.

Check out the support page for our phone number and hours

error-close