Modified Accelerated Cost Recovery System (MACRS)

The Modified Accelerated Cost Recovery System (MACRS) is a method used in the U.S. for depreciating assets like equipment and buildings for tax purposes. It allows businesses to recover the costs of their investments more quickly than under previous systems, typically over five, seven, or fifteen years, depending on the type of asset. This means companies can deduct larger amounts from their taxable income in the early years after purchasing an asset, thus reducing their tax liability and improving cash flow. MACRS is advantageous for businesses as it encourages investment by allowing faster cost recovery.