Accelerated Depreciation

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Accelerated Depreciation
Accelerated Depreciation (“Theoretical Depreciation” for tax purposes) is a method of calculating the cost write-off (depreciation) of certain personal property and improvements to real property at a faster rate than would be achieved by using the straight-line method of depreciation (the same amount every year).
Theoretical Depreciation is considered a “non cash expenditure” because it is treated as an expense for tax purposes, without the taxpayer having to actually spend any money.
The property must be used in a trade or business or held for the production of income. This method assumes that an asset deteriorates more rapidly in its early years.
Accelerated Cost Recovery System (ACRS) is a simplified depreciation system originally created under the Economic Recovery Tax Act of 1981 to replace the old “ADS class life” system. Costs can be written off over a predetermined amount of time depending on the class or property. ACRS applied to most equipment placed in service between 1980 and before 1987.
The Tax Reform Act of 1986 contained several changes to the ACRS rules. The changes are generally effective for property placed in service after December 31, 1986. (See modified accelerated cost recovery system [MACRS], Tax Reform Act of 1986.)

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