Indigo Company's MACRS Deduction Calculation for 2019

Calculating Indigo Company's MACRS Deduction for 2019

Indigo Company acquired a new machine, which is a 5-year MACRS property, on February 2, 2019, at a cost of $100,000. On November 18, 2019, Indigo also acquired office equipment, a 7-year MACRS property, at a cost of $50,000. Indigo did not make a § 179 expense election and chose not to take additional first-year depreciation.

What is Indigo's total MACRS deduction for 2019?

Question: What is Indigo's total MACRS deduction for 2019?

Answer:

$27,145

Explanation:

Data provided in the question:

Cost of the machine = $100,000

Type of machine 5-year MACRS property

From the MACRS table,

Depreciation rate of 5-year MACRS property for year 1 = 20%

Therefore, Depreciation for the machine in the year 2019 = $100,000 × 0.20 = $20,000

Cost of the office equipment = $50,000

Type of equipment 7-year MACRS property

From the MACRS table,

Depreciation rate of 7-year MACRS property for year 1 = 14.29%

Therefore, Depreciation for the equipment in the year 2019 = $50,000 × 0.1429 = $7,145

Hence, the total deduction = $20,000 + $7,145 = $27,145