The Accelerated Cost Recovery System (ACRS) is a method of depreciation used for tax purposes that allows businesses to recover the cost of certain assets more quickly than traditional straight-line depreciation. This system allows for larger deductions in the earlier years of an asset’s useful life, which can result in lower taxable income and reduced tax liability for the business. ACRS was introduced as part of the Economic Recovery Tax Act of 1981 and was later replaced by the Modified Accelerated Cost Recovery System (MACRS) in 1986.
The Accelerated Cost Recovery System (ACRS) is a method of depreciation used for tax purposes in the United States. It was introduced in 1981 as part of the Economic Recovery Tax Act. ACRS allows businesses to recover the cost of certain assets over a shorter period of time than traditional straight-line depreciation.
Under ACRS, assets are classified into different classes based on their useful lives. Each class has a predetermined recovery period, ranging from 3 to 15 years. The recovery period determines the rate at which the cost of the asset can be deducted for tax purposes.
ACRS allows for accelerated depreciation, meaning that a larger portion of the asset’s cost can be deducted in the earlier years of its useful life. This provides businesses with a tax advantage by reducing their taxable income in the early years of asset ownership.
However, the Modified Accelerated Cost Recovery System (MACRS) has taken the place of ACRS for the majority of assets put into service since 1986. MACRS is a more complex system that takes into account the asset’s recovery period, depreciation method, and convention.
In summary, the Accelerated Cost Recovery System (ACRS) is a method of depreciation that allows businesses to recover the cost of assets over a shorter period of time for tax purposes. For assets placed in service after 1986, the Modified Accelerated Cost Recovery System (MACRS) has largely replaced it.
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This glossary post was last updated: 11th April 2024.
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