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The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method widely used by businesses to recover the cost of certain property over a specified period. One of the most commonly used depreciation schedules under MACRS is the 7-year table, which is applicable to a wide range of assets, including:
By understanding and leveraging the MACRS 7-year table, businesses can optimize their tax strategies, improve cash flow, and enhance their overall financial performance. Here's a comprehensive guide to help you navigate the complexities of this depreciation method.
The MACRS 7-year table assigns different depreciation rates to assets over a 7-year period. The following table outlines the depreciation percentages for each year:
Year | Depreciation Rate |
---|---|
1 | 14.29% |
2 | 24.49% |
3 | 17.49% |
4 | 12.49% |
5 | 8.93% |
6 | 8.92% |
7 | 8.93% |
To use the MACRS 7-year table, follow these steps:
Example: If a business purchases office furniture for $10,000, the annual depreciation deductions under the MACRS 7-year table would be as follows:
Year | Depreciation Rate | Depreciation Deduction |
---|---|---|
1 | 14.29% | $1,429 |
2 | 24.49% | $2,449 |
3 | 17.49% | $1,749 |
4 | 12.49% | $1,249 |
5 | 8.93% | $893 |
6 | 8.92% | $892 |
7 | 8.93% | $893 |
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