Depreciation 101: What is MACRS?

This video is the first in a series of videos on depreciating business assets. The video gives a brief introduction to the concept of depreciation and gives a basic overview of the Modified Accelerated Cost Recovery System or MACRS, which is the system the IRS uses to calculate depreciation for tax purposes.
Then, the video gives an example of two business people, following them as they purchase new assets for their business, and report the associated depreciation on their tax return.
To see an earlier video on depreciation, chiefly involving rental property, click here: • Taxes for landlords, p...
Introduction: 0:00
Why do we depreciate assets? 0:40
What is MACRS? 2:38
Depreciation in action (Alice and Ralph's Bakery) 4:20
Tracking depreciation 6:34
Conclusion 7:05
Additional Information and Resources:
IRS Publication 946: "How to Depreciate Property": www.irs.gov/pu... (You'll find all the MACRS depreciation and asset recovery period tables in this publication)
IRS Form 4562: "Depreciation and Amortization": www.irs.gov/pu...
Investopedia: "What are the Different Ways to Calculate Depreciation?": www.investoped...
Nerdwallet: "What is Depreciation? Definition, Types, How to Calculate": www.nerdwallet...
The Tax Geek on Twitter: @taxgeekusa
The Tax Geek on Reddit: www.reddit.com/r/askataxgeek
Image Sources:
Storyblocks.com
Pexels.com
Wikimedia Commons (CC-SA 2.0 - 4.0)
Retro Computing Society of RI
NatGeoLover
Images of commercial kitchen equipment from www.webstaurant.com
NOTE: Any 2022 tax forms represented in this video have yet to be released by the IRS, and may differ from the forms that will ultimately be released. The 2022 tax forms as depicted are expected to be very similar to their 2021 counterparts.
Intro Music: "Bluesy Vibes" - Doug Maxwell - KZbin Audio Library
Outro Music: "Modern Attempt" - Track Tribe via KZbin Audio Library
DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice or investment advice for individual situations. If you have questions regarding your particular situation, please consult with a qualified tax or investment professional.
The information in this video is current as of date of publication, and is subject to changes.

[@shinshigure]

This is the best explanation of MACRS in KZbin! Thanks.

[@TheTaxGeek]

You're welcome. And thank YOU.

[@miguelalvarado1440]

Thanks. This is really a solid introduction to MACRS. I appreciated it! Have a good holidays!!!

[@TheTaxGeek]

Thanks! and you have a good holiday as well!

[@Lekeing]

Great content. Makes the concept a lot easier to understand

[@ellenoir5678]

Top of morning coach!!

[@nadialandas8420]

thank you so so so much

[@amitsavadatti7974]

I love the way you explain. What happens for the personal property assets (1245) when we sell the property within 3years of purchase and we opted fot cost segregation study.

[@TheTaxGeek]

I haven't really covered disposition of business-use assets (except for real property), but in short any gain (or loss) on the sale of a business-use assets is the selling price minus the adjusted basis (which is the original cost of the asset minus any depreciation you took (or could have taken). Unless the asset increased in value since you purchased it, any gain would be reported as ordinary income and any loss could be used to offset other income. Look for a video on this subject soon!

[@luxurytaxprep]

Wow made this concept extremely digestible! Do you have a video for part 1 and 2 yet? Or a course?

[@TheTaxGeek]

I've already made videos on Special Depreciation kzbin.info/www/bejne/n6C8oo2ga9x8jtU and the Section 179 Deduction. And a video on Vehicle Depreciation is currently in the scriptwriting phase.

[@wombat0433]

Gtgank you