Accelerated Cost Recovery System
Definition of "Accelerated cost recovery system"
The accelerated cost recovery system is a depreciation system for tax purposes mandated by the Economic Recovery Tax Act of 1981. In 1986 the Accelerated Cost Recovery System (ACRS) was replaced with the modified accelerated cost recovery system (MACRS). The tax reform changed the rules for the depreciation of assets that were purchased between 1980 and 1986. It was signed by President Ronal Regan only six months after he became President and affected the depreciation and increased how much deductions property owners were allowed to demand. The leaders that proposed this tax act thought that the reform would send the country’s economy on accelerated growth.
The accelerated cost recovery system is a way to accelerate the depreciation of a property that allows more significant tax deductions for property owners. The types of properties are divided into classes. Instead of providing statutory tables, prescribed depreciation methods are assigned to each class of property by a predetermined period of time, in this case, between 1980 and December of 1986.
How did the Accelerated Cost Recovery System work?
The accelerated cost recovery system affects depreciation based on a recovery period determined by the IRS and not by the property’s actual usability and life. It’s also applied to companies as within the Economic Recovery Tax Act of 1981; incentives were also included for small businesses and retirement savings.
The tax reform also allowed for a reduction of taxes on capital gains from 28% to 20% and a more significant estate-tax exemption. For companies, the accelerated cost recovery system would increase the depreciation amounts providing more substantial tax returns. Like this, the company could use more revenue generated from its assets for investments or debt that is due.
The Economic Recovery Tax Act of 1981 remained a somewhat controversial tax reform as the most significant impact was felt by the rich. To this day, it was the most significant tax cut for the wealthy Americans decreasing the top rate taxes from 70% to 50% in around three years. In the meantime, the poor had tax cuts from 14% to 11%.
Popular Real Estate Terms
(1) Temporary and symbolic payment showing good faith and obligating two or more individuals until a final transaction takes place. The binder is typically returned if the final agreement ...
A cooperating broker or agent defines a real estate broker who helps another broker in a private property transaction. Typically, the cooperating broker represents the seller and is ...
A legally transferable debt instrument by which the issuer agrees to pay the payee within a certain time period. Note usually pay a specified rate of interest tied to the market rate of ...
(1) Type of loan where the final payment is substantially greater than the previous payments; also termed partially amortized loan. A debt agreement might stipulate a balloon payment when ...
Earthquake insurance is the type of insurance policy that specifically covers damages to your real estate caused by seismic activities. It can refer both to the rare coverage against ...
Latin: now for then. Descriptive of actions which are performed after a deadline has elapsed, but retroactively have the same effect as if they were carried out in a timely manner. For ...
(1) Methods that involve discounting the future cash flows generated by an income property. These techniques are used primarily for valuation. (2) Methods of selecting and ranking ...
Approach to appraise rental property based on anticipated future earnings to be derived from it plus the estimated selling price at the end of he period held. ...
Landowner's legal right to the water found on his property. For example, there might be a stream of water adjacent to the land. The water might be used for irrigation or other purposes. ...
Have a question or comment?
We're here to help.