MACRS Recovery Periods Under the General Depreciation System (GDS)
Depreciable assets, except for buildings, fall within a three-year, five-year, seven-year, 10-year, 15-year, or 20-year recovery period under the general depreciation system (GDS).
However, the actual recovery period shown in the MACRS depreciation tables show a recovery period of one additional year. This is because of the convention rules.
Under the half-year convention you may only deduct 50% of the first year's depreciation. Thiis is because the half-year convention treats property as being purchased in the middle of the year regardless of when you actually purchased the property during the year. The balance of depreciation, the remaining 50%, is written off in the year after the last class life year of the property.
Also note that, under the half-year convention, if the property is sold, only one-half of the full depreciation for that year is deductible.
If you look at the MACRS table (shown below) for 5-year property (i.e. computers), for example, you'll notice that the span of years for the recovery period is six years. This is because, under the half-year convention:
- Only 50% of the first year's depreciation is deductible.
- From the second year through the fifth year, a full year's depreciation is deductible each of those years.
- The balance of depreciation is written off in the year after the last class life year. For 5-year property that's the sixth year. So, 1/2 + 5 + 1/2 (the balance remaining in the last year after the class life year) equals 6 years.
|Type of Property||Recovery Period||Examples of Property|
|3-year property||4-years||This class includes property with a class life of four years or less.
Special tools and devices for the manufacture of food, beverages, rubber products, finished plastics, fabricated metal products; race horses more than two years old when placed in service and other horses more than 12 years old when placed in service
|5-year property||6 yrs||This class includes property with a class life of more than four years and less than 10 years.
Cars and light-duty trucks (actual unloaded weight less than 13,000 pounds), taxis, buses, computers, computer-related peripheral equipment, typewriters, copiers, duplicating equipment, heavy general purpose trucks, trailers, cargo containers, trailer-mounted containers
|7-year property||8 yrs||This class includes property with a class life of 10 years or more but less than 16 years.
Office furniture and fixtures (desks, safes, files); cell phones; fax machines; refrigerators; dishwashers, machines used to produce musical instruments, toys and sporting goods.
NOTE: This class life is also used as a catch-all for assets not assigned a class life by law.
|10-year property||11 yrs||This class includes property with a class life of 16 years or more but less than 20 years.
Vessels, barges, tugs and water transportation equipment; assets used in petroleum refining or the manufacture of tobacco products
|15-year property||16||Items include: Land improvements such as fences, sidewalks, docks, shrubbery, roads and bridges.
It also includes other property with a class life of 20 years or more but less than 25 years, such as municipal sewage plants and telephone distribution plants.
For gas station convenience stores of no more than 1,400 square feet, or at least 50% of the floor space is devoted to selling petroleum products, or at least 50% of the revenues are from petroleum sale, the store would be in the 15-year class.
The operator of the business(es) on the property does not have to be the owner of the gas station property.
|20-year property||21 yrs||This class includes property with a class life of 25 years or more.
Farm buildings and municipal sewers (residential and nonresidential real estate is excluded)
|27.5-year property||-------||Includes residential rental property (must use straight-line depreciation)|
|39-year property||-------||Includes nonresidential real property (must use straight-line depreciation)|
- See the Business Deductions table of contents for more information about depreciation.