Alternative Depreciation System - ADS

DEFINITION of 'Alternative Depreciation System - ADS'

A depreciation schedule with a straight-line recovery period that generally mirrors the class life of the asset's depreciation. Taxpayers who elect to use the alternative depreciation system feel that the alternative schedule will allow for a better match of depreciation deductions against income than the regular recovery period. Once they have switched from an alternative such as the modified acceleration cost replacement system (MACRS), the taxpayer can not switch back.

BREAKING DOWN 'Alternative Depreciation System - ADS'

Taxpayers who choose the ADS schedule must use this schedule for all property of the same class that was placed in service during the taxable year. However, taxpayers may elect the ADS schedule for real estate on a property-by-property basis. The alternative depreciation system recovery schedule is listed in IRS Publication 946.

RELATED TERMS
  1. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax ...
  2. Depreciable Property

    Any type of asset that is eligible for depreciation treatment. ...
  3. General Depreciation System - GDS

    The most commonly used modified accelerated cost recovery system ...
  4. Bonus Depreciation

    An additional amount of deductible depreciation that is awarded ...
  5. Asset Depreciation Range - ADR

    An elective accounting method established by the Internal Revenue ...
  6. Half-Year Convention For Depreciation

    A depreciation schedule that treats all property acquired during ...
Related Articles
  1. Investing

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  2. Personal Finance

    How Does Depreciation Reduce My Tax Bill?

    How the depreciation tax rule can assist real estate investors.
  3. Personal Finance

    Explaining the Declining Balance Method

    The declining balance method is a system for calculating an asset’s rate of depreciation against its non-depreciated balance.
  4. Managing Wealth

    How Rental Property Depreciation Works

    It's a bit tricky, but a valuable tool to make your investment pay off.
  5. Investing

    Double Declining Balance Depreciation Method

    The double declining balance depreciation method counts the depreciation of a long-lived asset’s book value at double the rate of its straight-line depreciation.
  6. Trading

    Understanding Currency Depreciation

    Currency depreciation occurs when a currency’s value falls in comparison to other currencies.
  7. Personal Finance

    Filling Out Form 4562: Investopedia Explains

    Step-by-step, how to fill out the depreciation and amortization form for your business tax return.
  8. Investing

    Understanding Accumulated Depreciation

    Depreciation is a rough approximation, in dollar terms, of the wear and tear on an asset. So the accumulated depreciation is the aggregate of the wear and tear on the asset from all prior time ...
  9. Trading

    Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  10. Investing

    Understanding Capitalized Interest

    Capitalized interest is associated with debt used to make or construct a depreciable asset.
RELATED FAQS
  1. What is the relationship between accumulated depreciation and depreciation expense?

    Understand the relationship between accumulated depreciation and depreciation expense. Learn how each one is accounted for ... Read Answer >>
  2. How does accumulated depreciation affect net income?

    Learn why accumulated depreciation does not directly affect a company's net income; understand where a company accounts for ... Read Answer >>
  3. What are the different ways to calculate depreciation for tangible assets?

    Learn what depreciation is and how to calculate it using the straight line method, declining balance method, and the sum-of-the ... Read Answer >>
  4. Is depreciation only used for tangible assets?

    Learn if tangible assets can be depreciated, as well as what other assets are eligible for depreciation so you can account ... Read Answer >>
  5. What are the different ways to calculate depreciation?

    Read about some of the different allowable methods of calculating depreciation expenses as allowed by generally accepted ... Read Answer >>
  6. Are noncurrent assets depreciated?

    Learn about depreciation, why noncurrent assets are depreciated and how to calculate depreciation expenses using a straight-line ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center