Which system must be used for depreciating property placed in service after 1986?

The Modified Accelerated Cost Recovery System (MACRS) is the system required for depreciating property that is placed in service after 1986. This system was introduced as part of the Tax Reform Act of 1986 and it allows for a more accelerated depreciation schedule compared to previous methods, which can benefit taxpayers by allowing larger depreciation deductions in the earlier years of an asset's life.

MACRS includes specific recovery periods and depreciation methods based on the type of property, enhancing tax benefits for businesses that invest in machinery, buildings, and various other types of tangible property. It streamlined and standardized depreciation rules, making it easier for taxpayers to calculate their deductions.

The Accelerated Cost Recovery System (ACRS), on the other hand, was the predecessor to MACRS and was phased out after the introduction of MACRS, thus not applicable for property placed in service post-1986. Straight-Line Depreciation, while a method of calculating depreciation, does not align with the accelerated benefits of MACRS and is typically not the primary method used for business assets under current regulations. The Declining Balance Method is a specific approach that some might use, but it does not encompass the full MACRS framework which prescribes specific rates and classes of assets for depreciation.