Legal Definitions - Modified Accelerated Cost Recovery System

The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation used for tax purposes in the United States. It allows businesses to recover the cost of certain assets over a specified period of time, typically through annual deductions on their tax returns.

For example, let's say a business purchases a piece of equipment for $10,000. Under MACRS, the business can deduct a portion of the cost each year for a set number of years, rather than deducting the entire cost in the year of purchase. The specific deduction amounts and time periods depend on the type of asset and its useful life.

MACRS is designed to encourage businesses to invest in new equipment and other assets by providing tax incentives. By spreading out the cost of an asset over several years, businesses can reduce their taxable income and potentially lower their tax liability.