What is MACRS classification?

[Melanie Baldridge]

In US tax law, the depreciable lifespan of an asset is defined by its MACRS classification which stands for “Modified Accelerated Cost Recovery System.”

Under MACRS, depreciable assets are assigned to different classes, with each class having a specific recovery period.

When it comes to real estate, here's a general list of eligible assets and their depreciable lifespans that you should know:

Residential Rental Property = 27.5 years

This includes any building or structure where 80% or more of its gross rental income is from residential units.

That means:

- Apartment buildings

- Single-family rental homes

- Duplexes, triplexes, and quadplexes

- Mobile homes (used for residential rental)

- Any kind of residential lodging facility where the primary purpose is long-term rental

Commercial Property = 39 years

This includes non-residential properties like:

-Office buildings

-Retail stores and shopping centers

-Warehouses

-Industrial complexes

-Hotels and motels that do not qualify as residential rental property

Land Improvements = 15 years

These include sidewalks, roads, fencing, some landscaping, and parking lots that are separate from the building.

Personal Property = 5 or 7 years

Personal property used in a rental activity usually has a 5 or 7-year life.

This includes most furniture, appliances, carpeting and various machinery.

Qualified Improvement Property (QIP) = 15 years

Generally, this includes any improvements made to the interior of a non-residential building after the building was placed in service, excluding elevators, enlargements, and the internal structural framework.

Computers and Related Peripheral Equipment = 5 years

Vehicles = 5 years

Note that the land itself is not depreciable.