Modified Accelerated Cost Recovery System (MACRS) Example

Use the MACRS tax depreciation method to recover the capitalized cost (basis) of tangible property that was placed in service after 1986.

MACRS is comprised of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). These offer different methods and recovery periods for determining depreciation deductions, but GDS is most commonly used.

Vision uses the following information to calculate MACRS depreciation:

Field	Description	Location
Code	Enter the code and description to use for the depreciation method. The Code displays in the Methods drop-down list on the Asset Type tab of this form, and the Description displays in the Method drop-down list on the GL Book tab in the Equipment Info Center.	Configuration > Asset Management > Methods Tab
Description	Enter the description to use for the depreciation method. The Description displays in the Method drop-down list on the GL Book tab in the Equipment Info Center.	Configuration > Asset Management > Methods Tab
Useful Life in Years	Determines how many periods, in total, should be applied to the depreciation method. For all depreciation methods except straight-line, you can only modify the useful life in years on the Methods tab.	Configuration > Asset Management > Method Tab
Asset Period Per Year	Select the number of asset periods per year to synchronize the asset calendar with the fiscal calendar. This only applies if your instance of Vision is set up for 13 periods and allows you to select either 12 or 13 asset periods per year.	Configuration > Asset Management > General Tab

Vision defaults to applying the full month convention for depreciation; however you can configure the depreciation rate to best suit your firm's requirements.

For example, when setting up MACRS half-year convention, you could reference the following table that is provided by the IRS:

Table 1. MACRS Half-Year Convention

Year	Depreciation Rate for Recovery Period
	3-year	5-year	7-year	10-year	15-year	20-year
1	33.33	20.00	14.29	10.00	5.00	3.750
2	44.45	32.00	24.49	18.00	9.50	7.219
3	14.81	19.20	17.49	14.40	8.55	6.677
4	7.41	11.52	12.49	11.52	7.70	6.177
5		11.52	8.93	9.22	6.93	5.713
6		5.76	8.92	7.37	6.23	5.285
7			8.93	6.55	5.90	4.888
8			4.46	6.55	5.90	4.522
9				6.56	5.91	4.462
10				6.55	5.90	4.461
11				3.28	5.91	4.462
12					5.90	4.461
13					5.91	4.462
14					5.90	4.461
15					5.91	4.462
16					2.95	4.461
17						4.462
18						4.461
19						4.462
20						4.461
21						2.231

In Vision, go to the Configuration > Asset Management > Methods Tab, enter the MACRS depreciation Code and Description in the Depreciation Methods grid, and 4 as the Useful Life in Years. When you select this grid row, the Secondary grid automatically populates with four rows, where you can enter the percentages for 3-year depreciation rate for recovery method that are defined in the table shown above. For example, enter the following information in the grid:

Year	Periods	Percentage
1	6	44.45%
2	12	33.33%
3	12	14.81%
4	6	7.41%

As you can see, these percentages are in alignment with the three-year shown on the IRS table. If you then purchase an asset item for $200,000 that falls into MACRS three-year, half-year convention schedule, the depreciation calculation will occur as follows:

Year	Periods	Percentage of$200,000	Depreciation Amount based on $200,000
1	6	44.45%	$88,900
2	12	33.33%	$66,660
3	12	14.81%	$29,620
4	6	7.41%	$14,820

The IRS Publication 946 provides detailed information for configuring and using the MACRS method of depreciation. Refer to this document for further information: http://www.irs.gov/uac/About-Publication-946