Most business and rental property placed in service after 1986 is depreciated using the Modified Accelerated Cost Recovery System (MACRS). MACRS is the primary depreciation method allowed by the IRS and is used to recover the cost of qualifying property over a specific period of years.
The recovery period depends on the type of property you place in service.
Common MACRS Recovery Periods
Here are some common examples of property classifications under MACRS:
- 3-year property: Certain tractors and specialized farm equipment.
- 5-year property: Timber-cutting equipment and many types of vehicles, computers, and machinery.
- 7-year property: Office furniture, fixtures, and property that doesn't have a specific class life designated by law.
- 10-year property: Barges and certain fruit-bearing trees and vines.
- 15-year property: Land improvements, such as fences, sidewalks, roads, and landscaping.
- 20-year property: Farm buildings that are not residential rental property.
- 27.5-year property: Residential rental property, such as apartments, houses, and other residential rental buildings.
- 39-year property: Nonresidential real property, including office buildings, warehouses, retail stores, and most commercial buildings.
For further information regarding depreciation please see IRS publication 946