Oregon Tax Consultants Practice Exam

The acronym MACRS stands for Modified Accelerated Cost Recovery System. This term is significant in the context of tax accounting as it refers to the method used by businesses to recover the cost of certain capital investments over a specified period through depreciation deductions. Under MACRS, assets are classified into specific categories that determine their depreciation rates and useful lives, allowing for faster recovery of costs in the early years of an asset's life compared to traditional straight-line depreciation.

The "modified" aspect refers to adjustments made to the previous Accelerated Cost Recovery System (ACRS) to improve efficiency and predictability in depreciation. This method is advantageous for businesses, as it helps them reduce their taxable income in the early years after an investment, thereby enhancing cash flow.