What are MACRS Recovery Methods

You property is depreciated via 8 property classes under the MACRS recovery methods.

4 of these MACRS (Modified Accelerated Cost Recovery System) property classes are within the scope of this site; 5 year property, 7 year property, residential rental property, and nonresidential real property.

The length of time over which an asset is depreciated is called its depreciable life. Depreciable assets other than buildings fall within a three-, five-, seven-, 10-, 15-, or 20-year period under the general depreciation system (GDS). Note that claiming bonus depreciation does not change an asset’s recovery period.

Most business and investment property placed in service after 1986 is depreciated using MACRS recovery method. MACRS Recovery Method consists of two systems that determine how you depreciate your property, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). GDS is used to figure your depreciation deduction for property used in most rental activities, unless you elect ADS.

What are the MACRS Recovery Method classes

All property is assigned to 8 MACRS recovery method classes. The eight classes are titled for the number of years the property is to be depreciated.

1. 3 year property

  • Tractor units for over-the-road use.
  • Qualified rent-to-own property.
  • Property with a class life of four years or less, other than cars and light duty trucks, which are five year class.

2. 5 year property

  • Computers and peripheral equipment.
  • Automobiles, taxis, buses, and trucks.
  • Office machinery (such at typewriters, calculators, and copiers).
  • Any property used in research and experimentation.
  • Appliances, carpets, furniture, etc.. used in a residential rental real estate activity.

3. 7 year property

  • Office furniture and fixtures (such as desks, files, lamps, chairs, fax machines, carpets, and safes).
  • Agricultural machinery and equipment.

4. 10 year property

  • Vessels, barges, tugs, and water transportation equipment.
  • Any tree or vine bearing fruits or nuts.

5. 15 year property

  • Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges).

6. 20 year property

  • Farm buildings.
  • Municipal sewers.

7. Residential rental property

  • Any real property that is a rental building or structure, including a mobile home, for which 80% or more of the gross rental income for the tax year is from dwelling units.
  • Straight line recovery for residential rental property is claimed over a 27.5 year time frame.

8. Nonresidential real property

  • This property includes office buildings, stores, or a warehouse, that is neither residential rental property nor property with a class life of less than 27.5 years.
  • Straight line recovery for nonresidential real property is 39 years.

Real-Estate-Owner focuses on the MACRS recovery method for 5 year property, 7 year property, residential rental property, and nonresidential real property.

Click on this link to view the MACRS depreciation tables for these property types.