What is the recovery period for residential rental property under MACRS?

The recovery period for residential rental property under the Modified Accelerated Cost Recovery System (MACRS) is indeed 27.5 years. This designation is specifically applicable to property that is used primarily for residential purposes, such as apartment buildings or rental homes.

Under MACRS, the classification of property and its associated recovery periods are crucial for calculating depreciation. A 27.5-year recovery period reflects the IRS's determination of how long it typically takes for such properties to depreciate in value for tax purposes. This relatively longer recovery period recognizes the nature of residential rental properties, which tend to have stable and consistent income generation over a more extended period.

In contrast, other types of properties, such as non-residential real estate, fall into different recovery periods, like 39 years, whereas specific equipment or fixtures may have much shorter depreciation timelines. Understanding these distinctions is essential for effective financial planning and tax preparation for property owners and investors.