What is the Modified Accelerated Cost Recovery System depreciation?

Modified Accelerated Cost Recovery System (MACRS) is a depreciation system used for tax purposes in the U.S. MACRS depreciation allows the capitalized cost of an asset to be recovered over a specified period via annual deductions. The MACRS system puts fixed assets into classes that have set depreciation periods.

The Depreciation basis is calculated as half of the ITC reduced from the Total System Cost. So, if the cost of a project is $100,000, Tax Rate is 15% and ITC is 30%, then the Depreciation basis becomes $100,000 * (1 - 50% )* 30% * 15% = 85% of $100,000, which is equal to $ 85,000. Now, the depreciation is calculated using this basis amount as the starting point