Property is depreciated via 8 property classes!

4 of these MACRS 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 (Modified Accelerated Cost
Recovery System).  MACRS 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.

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

  1. 3 year 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 (such as printers,
    monitors, data storage systems and scanners), typewriters,
    copiers, calculators, adding machines as well as business
    car, truck, or van.
     
  3. 7 year property
    - desks, chairs, lamps, files, safes, fax machines,
    appliances, carpets, telephones, books
     
  4. 10 year property
    - property with a class life of 16 years or more and less than
    20 years, such as vessels, barges, tugs, and water transportation
    equipment, and assets used in petroleum refining or in the
    manufacture of tobacco products and certain food products.
     
  5. 15 year property
    - land improvements such as fences, sidewalks, docks, shrubbery,
    roads, and bridges. 
     
  6. 20 year property
    - property with a class life of 25 years or more, such as farm
    buildings and municipal sewers, except that residential and
    nonresidential real estate is excluded.
     
  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.
This site focuses on 5 year property, 7 year property,
residential rental property, and nonresidential real property.
Click on this link to view the depreciation chart for these property types.


 


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