Governor Deval Patrick's Budget Recommendation - House 1 Fiscal Year 2014

2.301 -Modified Accelerated Cost Recovery System on Rental Housing


Item DescriptionFY2012 FY2013 FY2014
2.301 Modified Accelerated Cost Recovery System on Rental Housing
Landlords and investors in rental housing may use accelerated methods of depreciation for new and used rental housing. Straight-line depreciation over the property's expected useful life is the generally accepted method for recovering cost, which is close to economic depreciation. However, through the past decades, the systems which adopt accelerated depreciation methods have been introduced. The current system is MACRS(Modified Accelerated Cost Recovery System) which was enacted in 1986. This system further accelerated the rate of recovery of depreciation than under ACRS(Accelerated Cost Recovery System) which was enacted in 1981. Differences between MACRS and ACRS are 1) deductions from the 150-percent declining balance method to the 200-percent declining balance; 2) certain assets were reclassified and the number of asset classes (80) was increased; and 3) the recovery period for residential rental property was extended to 27.5 years and for nonresidential real property to 31.5 years. For details, refer to the document, "Background and Present Law Relating to Cost Recovery and Domestic Production Activities", which was published by the Joint Committee on Taxation in their homepage on March 6th , 2012.

The excess of allowable depreciation over the generally accepted depreciation constitutes a tax expenditure, resulting in a deferral of tax or an interest-free loan.

Origin:  IRC S. 168
Estimate:  $2.7
3.4 3.1 2.7

Key:

ORIGIN  
IRCFederal Internal Revenue Code (26 U.S.C.)
M.G.L. Massachusetts General Laws
U.S.C United States Code
ESTIMATES All estimates are in $ millions.


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