Taxes: Depreciation on Barge

Suppose you purchase a $10,000 barge — a 10-year asset. Under the MACRS what is the depreciation on the barge in the 2nd year you own it?

In order to develop a solution, we need to address the givens first.

$10,000 barge (10 year asset)

Depreciation under MACRS in the 2nd year

The first thing we need to address here is that the problem is asking for the depreciation of the barge just in a single year (2nd year), not after 2 years of owning it. Be careful with that distinction since in a single year, you just account for one percentage (18.00% by Table 9.3); on the other hand, after 2 years of ownership, you need to account for multiple percentages (10.00% and 18.00% by Table 9.3).

Once we have clarified such distinction, we can proceed to Table 9.3 in the textbook and look for the depreciation percentage in year 2 under class 10 assets (18.00%):

Total Depreciation = $10,000 (0.18) = $1,800

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