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Seven-year property of 100,000 under MACRS: Publication 946's half-year percentages, the switch from 200 % declining balance, and the tax shield against the book methods

ToolDepreciation (MACRS)
SourceInternal Revenue Service (2026). How to Depreciate Property. Publication 946 (2025), U.S. Department of the Treasury, Washington, DC. Chapter 4 (MACRS Worksheet example, 7-year office furniture; "Figuring the Deduction Without Using the Tables") and Appendix A Table A-1; Blank, L. T., and Tarquin, A. J. (2012). Engineering Economy, 7th ed. McGraw-Hill, New York. Chapters 16 and 17.
LevelUndergraduate

Problem

A 100,000 asset in the 7-year MACRS class is placed in service in August 2025 (half-year convention). Tabulate the GDS depreciation and book value for the eight tax years, show that Table A-1 follows from 200 % declining balance with the switch to straight line, compare the schedule with straight line, 150 % and 200 % declining balance and sum-of-years digits on a 10,000 salvage over seven years and with ADS over ten years, and find the present value of each method's tax shield and the after-tax NPV of the asset at a 21 % tax rate, an 8 % after-tax rate and a 25,000 annual pre-tax saving.

Inputs to Enter

  • Cost 100,000, salvage 10,000 (book methods), book life 7 years, placed in service August 2025, method MACRS GDS, class 7-year, half-year convention, ADS period 10 years
  • Section 179 0, bonus 0 %, no disposal; tax rate 21 %, capital-gain rate 21 %, discount rate 8 %, annual saving 25,000, horizon = schedule (8 years)
Open the Depreciation (MACRS) tool (loaded with this example)

Answers

  • Table A-1, 7-year: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, 4.46 % → 14,290 / 24,490 / 17,490 / 12,490 / 8,930 / 8,920 / 8,930 / 4,460 (Pub 946's 10,000 furniture example gives 1,429 / 2,449 / 1,749 / 1,249 / 893 / 892 / 893 / 446)
  • Declining-balance rate 2/7 = 28.571 %, first year one half: 14.2857, 24.4898, 17.4927, 12.4948 %, then straight line over the 3.5 years left, 8.9249 % × 3 and 4.4624 %: the printed table to the rounding of the last digit, switch in the fifth year as Pub 946 states
  • Book methods: SL 12,857.14 a year; SYD 22,500 … 3,214.29; 200 % DB 28,571.43 … 3,281.03 (capped at the salvage value); 150 % DB switches to straight line in year 5 at 9,370.57
  • PV of the tax shield at 8 %: MACRS 16,088.36, 200 % DB 15,435.20, SYD 15,133.75, 150 % DB 14,735.21, SL 14,057.20, ADS 10-year 13,569.28 (total shield 21,000 for the tax methods, 18,900 for the book methods)
  • After-tax cash flow year 1: 25,000 − 0.21 (25,000 − 14,290) = 22,750.90; NPV over 8 years = 29,584.48; deferred tax (SL book against MACRS) 300.90 in year 1, liability 3,639.60 after year 4

Notes

The tool's default inputs are this case; press Submit. Every number is checked in test_depreciation.php against Publication 946 (113 printed table cells and the chapter 4 examples, including the mid-quarter and mid-month disposition examples), Blank and Tarquin's Examples 16.1 to 16.3 and the numpy script References/Depreciation/deprec_check.py.