Final answer:
MACRS, or Modified Accelerated Cost Recovery System, is a tax depreciation method allowing businesses accelerated depreciation on assets for tax purposes, potentially enhancing tax write-offs in the early years of an asset's life.
Step-by-step explanation:
The acronym MACRS stands for Modified Accelerated Cost Recovery System. It is a tax depreciation method that allows businesses to deduct the depreciated cost of certain assets over a specific time dictated by the system. The MACRS system accelerates the rate of depreciation compared to traditional straight-line depreciation, offering more significant tax deductions in the early years of an asset's life. This system is commonly used for tax calculation purposes and aims to stimulate investment by businesses into new assets by offering quicker tax write-offs.
Under MACRS, the cost of assets is recovered over the useful life as defined by the IRS. There are specific depreciation schedules for different types of assets. To calculate MACRS depreciation, one must identify the property class, determine the basis for depreciation, and then apply the appropriate depreciation schedule.