Which depreciation method does MACRS prohibit for depreciable assets?

The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation in the United States that allows for a faster depreciation schedule than traditional methods. Under MACRS, specific depreciation methods are prescribed for various types of assets to encourage investment and accelerate the recovery of costs.

The reason the sum-of-the-years'-digits method is prohibited under MACRS relates to the fact that MACRS primarily utilizes the declining balance method (specifically the double declining balance method) and the straight-line method as its primary approaches for asset depreciation. MACRS is designed to standardize depreciation calculations and streamline the process, while the sum-of-the-years'-digits method is not included in this framework.

Using MACRS, taxpayers are expected to follow predetermined recovery periods and specific rates, which are not aligned with the varied calculations that the sum-of-the-years’-digits method requires. Thus, it simplifies compliance and reduces the complexity in determining depreciation for tax purposes.