Modified Accelerated Cost Recovery System (MACRS) a.

MACRS is mandatory for most depreciable property placed in service after 1986. b. Salvage value is completely ignored under MACRS; the method of cost recovery and the recovery period are the same for both new and used property. c. Recovery property includes all property other than land, intangible assets, and property the taxpayer elects to depreciate under a method not expressed in terms of years (e.g., units of production or income forecast methods). Recovery property placed in service after 1986 is divided into six classes of personal property based on ADR midpoint life and into two classes of real property. Each class is assigned a recovery period and a depreciation method. Recovery deductions for the first six classes are based on the declining balance method, switching to the straight-line method to maximize deductions. (1) 3-year, 200% class. Includes property with an ADR midpoint of 4 years or less (except for autos and light trucks) and certain horses (2) 5-year, 200% class. Includes property with an ADR midpoint of more than 4 and less than 10 years. Also included are autos and light trucks, computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc.) (3) 7-year, 200% class. Includes property with an ADR midpoint of at least 10 and less than 16 years. Also included are property having no ADR midpoint and not classified elsewhere, and office furniture and fixtures (desks, files, etc.) (4) 10-year, 200% class. Includes property with an ADR midpoint of at least 16 and less than 20 years (5) 15-year, 150% class. Includes property with an ADR midpoint of at least 20 years and less than 25 years (6) 20-year, 150% class. Includes property with an ADR midpoint of 25 years or more, other than real property with an ADR midpoint of 27.5 years or more (7) 27 1/2-year, straight-line class. Includes residential rental property (i.e., a building or structure with 80% or more of its rental income from dwelling units) (8) 39-year, straight-line class. Includes any property that is neither residential real property nor property with a class life of less than 27.5 years