1.304 Modified Accelerated Cost Recovery System (MACRS) for Equipment

In general, businesses may recover the cost of durable business assets only by capitalizing the cost and claiming depreciation deductions over a period of years. Traditional financial accounting rules required the cost to be recovered pro rata over a set number of years. However, Massachusetts conforms to the Modified Accelerated Cost Recovery System (MACRS) set out in the Internal Revenue Code (the "Code"). MACRS allows more of the cost of the property to be deducted in the first few years of an asset's life, and relatively less later. MACRS also allows taxpayers to choose an alternative depreciation method that more closely conforms to traditional financial accounting rules. The use of the accelerated method instead of the alternative method results in a temporary reduction of tax in the earlier years of an asset's life, which constitutes a tax expenditure. The deferral of tax is analogous to an interest-free loan from the Commonwealth to taxpayers.

Origin: IRC § 168