What is the salvage value when using MACRS depreciation?

In the context of the Modified Accelerated Cost Recovery System (MACRS) depreciation, the salvage value of an asset is not explicitly factored into the depreciation calculation. Under MACRS, assets are depreciated over a specified recovery period without regard to any potential salvage value. Typically, this means that the assumption used in calculations is that the salvage value is zero.

This approach simplifies the depreciation process by allowing for full recovery of the capital cost over its useful life without making adjustments for what the asset might be worth at the end of that period. As a result, the estimated salvage value does not impact the annual depreciation deductions taken. Therefore, in MACRS, it is a common practice to consider the salvage value to be zero. This helps ensure a straightforward application of the depreciation method without complicating the calculations with estimates of residual values.