Recovery periods
MACRS asset classes and recovery periods, all of them
The general asset classes from Rev. Proc. 87-56, the statutory real property classes, ADS lives and the methods and conventions that go with each. Bookmark it.
Real property and other statutory classes
These recovery periods come from the statute rather than from an asset class table.
| Class | GDS life | ADS life | Method & convention | Notes |
|---|---|---|---|---|
| Residential rental property | 27.5 | 30 | Straight line, mid-month | Buildings where 80% or more of gross rental income is from dwelling units. |
| Nonresidential real property | 39 | 40 | Straight line, mid-month | All other buildings — office, retail, industrial, hotel, medical. |
| Qualified improvement property | 15 | 20 | Straight line, half-year or mid-quarter | Interior improvements to nonresidential buildings placed in service after the building. Bonus eligible. |
| Land improvements | 15 | 20 | 150% declining balance | Paving, curbing, site lighting, landscaping, fencing, drainage, utilities. |
| Water utility property | 25 | 50 | Straight line | Certain water utility assets. |
| Railroad grading and tunnel bores | 50 | 50 | Straight line | Grading and tunnel bore improvements. |
| Land | Not depreciable | — | — | Always carved out of basis before anything else happens. |
General asset classes
Assets used in an activity are assigned by the activity, not by the item. A desk in a manufacturing plant is office furniture in class 00.11, not manufacturing equipment. Property with no class life defaults to 7 years under GDS and 12 years under ADS.
| Asset class | Description | GDS | ADS | Method |
|---|---|---|---|---|
| 00.11 | Office furniture, fixtures and equipment | 7 | 10 | 200% DB |
| 00.12 | Information systems — computers and peripheral equipment | 5 | 5 | 200% DB |
| 00.13 | Data handling equipment other than computers | 5 | 6 | 200% DB |
| 00.21 | Airplanes not used in commercial or contract carrying | 5 | 6 | 200% DB |
| 00.22 | Automobiles and taxis | 5 | 5 | 200% DB |
| 00.23 | Buses | 5 | 9 | 200% DB |
| 00.241 | Light general purpose trucks (under 13,000 lbs) | 5 | 5 | 200% DB |
| 00.242 | Heavy general purpose trucks (13,000 lbs and over) | 5 | 6 | 200% DB |
| 00.25 | Railroad cars and locomotives | 7 | 15 | 200% DB |
| 00.26 | Tractor units for over-the-road use | 3 | 4 | 200% DB |
| 00.27 | Trailers and trailer-mounted containers | 5 | 6 | 200% DB |
| 00.28 | Vessels, barges, tugs and similar water transportation | 10 | 18 | 200% DB |
| 00.3 | Land improvements | 15 | 20 | 150% DB |
| 00.4 | Industrial steam and electric generation and distribution | 15 | 22 | 150% DB |
| 01.1 | Agriculture — machinery and equipment | 7 | 10 | 150% DB |
| 01.3 | Farm buildings other than single-purpose structures | 20 | 25 | 150% DB |
| 01.4 | Single-purpose agricultural or horticultural structures | 10 | 15 | 150% DB |
| 13.2 | Exploration for and production of petroleum and natural gas | 7 | 14 | 200% DB |
| 13.3 | Petroleum refining | 10 | 16 | 200% DB |
| 15.0 | Construction — machinery and equipment | 5 | 6 | 200% DB |
| 20.1 | Manufacture of grain and grain mill products | 10 | 17 | 200% DB |
| 20.4 | Manufacture of other food and kindred products | 7 | 12 | 200% DB |
| 22.3 | Manufacture of carpets and apparel | 5 | 9 | 200% DB |
| 24.1 | Cutting of timber | 6 | 6 | 200% DB |
| 24.2 | Sawing of dimensional stock from logs | 10 | 10 | 200% DB |
| 28.0 | Manufacture of chemicals and allied products | 5 | 9.5 | 200% DB |
| 30.1 | Manufacture of rubber products | 7 | 14 | 200% DB |
| 32.1 | Manufacture of glass products | 7 | 14 | 200% DB |
| 33.2 | Manufacture of primary nonferrous metals | 7 | 14 | 200% DB |
| 34.0 | Manufacture of fabricated metal products | 7 | 12 | 200% DB |
| 36.0 | Manufacture of electronic components, products and systems | 5 | 6 | 200% DB |
| 37.11 | Manufacture of motor vehicles | 7 | 12 | 200% DB |
| 48.12 | Telephone central office equipment | 10 | 18 | 200% DB |
| 48.14 | Telephone distribution plant | 15 | 24 | 150% DB |
| 49.13 | Electric utility steam production plant | 20 | 28 | 150% DB |
| 49.21 | Gas utility distribution facilities | 20 | 35 | 150% DB |
| 50.0 | Municipal wastewater treatment plant | 15 | 24 | 150% DB |
| 51.0 | Municipal sewers | 20 | 50 | 150% DB |
| 57.0 | Distributive trades and services — most retail and service assets | 5 | 9 | 200% DB |
| 57.1 | Distributive trades and services — billboards, service station buildings | 15 | 20 | 150% DB |
| 79.0 | Recreation — bowling alleys, billiard halls, theatres, athletic clubs | 7 | 10 | 200% DB |
| 80.0 | Theme and amusement parks | 7 | 12.5 | 200% DB |
Methods and conventions
| Property | Default method | Convention | Bonus eligible |
|---|---|---|---|
| 3, 5, 7 and 10-year property | 200% declining balance, switching to straight line | Half-year, or mid-quarter if triggered | Yes |
| 15 and 20-year property | 150% declining balance, switching to straight line | Half-year, or mid-quarter if triggered | Yes |
| Residential rental (27.5) | Straight line | Mid-month | No |
| Nonresidential real (39) | Straight line | Mid-month | No |
| Qualified improvement property (15) | Straight line | Half-year or mid-quarter | Yes |
| Any class under ADS | Straight line | As applicable | No |
The mid-quarter trap. If more than 40% of the aggregate basis of personal property
placed in service during the year falls in the fourth quarter, every personal property addition for that year
switches from the half-year to the mid-quarter convention. Real property is excluded from the test. A large
fourth-quarter cost segregation reclassification can trigger it, which is worth modelling before December rather
than discovering in March.
When ADS is required
The alternative depreciation system uses straight-line recovery over longer lives, and it is mandatory rather than elective in several situations:
- Property used predominantly outside the United States
- Tax-exempt use property and tax-exempt bond financed property
- Property used predominantly in a farming business that elects out of the interest limitation
- Residential rental and nonresidential real property held by an electing real property trade or business under section 163(j)(7) — a common and easily missed consequence of that election
- Listed property used 50% or less in a qualified business use
Worth checking before you file. Electing out of the section 163(j) business interest
limitation as a real property trade or business requires ADS on your real property — 30 years for residential rental,
40 for nonresidential, 20 for qualified improvement property. It also makes that real property ineligible for bonus
depreciation. Owners who make that election and then commission a cost segregation study are sometimes surprised at
the result. Model both together.
Where cost segregation fits
Nothing above changes what a component is. A study does not create a shorter life; it establishes, with engineering evidence, which class a component belonged in from the beginning. The table is the destination. The study is the argument for getting there.
Get a feel for it
Which schedule would you put it on?
This is the call an engineer makes hundreds of times per building. Try a few — the answer and the reason appear after each.
Which schedule does it go on?
Score: 0 / 0
No-cost feasibility review
Find out what your building is hiding.
A feasibility review is free and takes about twenty minutes. Bring the closing statement and the depreciation schedule; we will tell you plainly whether a study pays for itself.