Asset Class 57.1: Depreciation and Recovery Periods
Gain clarity on the tax depreciation rules for Asset Class 57.1, from standard recovery periods to accelerated deduction options for specific properties.
The Internal Revenue Service (IRS) utilizes a framework to classify business assets for tax depreciation purposes. This system, known as the Modified Accelerated Cost Recovery System (MACRS), groups various types of property into specific asset classes. Each class is assigned a depreciable life, which dictates the period over which a business can recover the cost of an asset through tax deductions.
Assets Included in Class 57.1
Asset Class 57.1, formally titled “Distributive Trades and Services—Billboard, Service Station Buildings, and Petroleum Marketing Land Improvements,” encompasses a specific set of properties. This classification primarily includes Section 1250 assets, which are specific types of real property. The category is narrowly defined and centers on assets used in the marketing of petroleum and its related products.
A major component of this asset class consists of service station buildings. This includes the primary structure of a gas station and any attached convenience stores. For example, a building that houses both the payment counter for fuel and a retail space for selling snacks and beverages would be considered a service station building under this class. Car wash buildings, whether standalone or attached to the main service station, are also explicitly included.
The class also covers land improvements associated with petroleum marketing. These are depreciable enhancements to the land, with common examples including the large canopies that cover gas pump islands, underground fuel storage tanks, and the concrete or asphalt paving that constitutes the service area. It also includes assets like sidewalks, drainage facilities, and fences on the property.
Finally, billboards are a distinct category within Asset Class 57.1. This includes the physical structure of the billboard, whether it is traditional or digital, used for advertising purposes. The classification applies regardless of whether the billboard is considered Section 1245 (personal property) or Section 1250 (real property) property.
Depreciation Recovery Periods
The recovery period for an asset determines the number of years over which its cost can be depreciated. For assets in Class 57.1, the IRS provides two main depreciation systems: the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Most taxpayers use GDS, as it is the default system and allows for faster cost recovery.
Under the GDS, property in Asset Class 57.1 has a recovery period of 15 years. This means a business can deduct the cost of a new service station building or a billboard over a 15-year timeframe.
The Alternative Depreciation System (ADS) is the second option and is mandatory in certain situations. For Asset Class 57.1, the ADS recovery period is 20 years. Taxpayers must use ADS for specific types of property, such as assets used for tax-exempt purposes or property financed with tax-exempt bonds. A business may also make an irrevocable election to use ADS for any class of property, which might be advantageous for certain tax planning strategies, although it extends the depreciation timeline.
Special Depreciation Allowances
Beyond the standard GDS and ADS schedules, taxpayers can utilize special depreciation allowances to accelerate deductions for property in Asset Class 57.1. These provisions allow a significant portion, or even all, of an asset’s cost to be deducted in the year it is placed in service.
One such provision is bonus depreciation. This allowance permits businesses to immediately deduct a percentage of the cost of new and used qualifying property. For property like that in Asset Class 57.1 with a recovery period of 20 years or less, bonus depreciation can be applied. This benefit is being phased out, and for property placed in service in 2025, the bonus depreciation rate is 40%. This rate is scheduled to decrease to 20% in 2026 before being eliminated in 2027.
The Section 179 deduction allows a business to treat the cost of qualifying property as an expense rather than a capital expenditure. This means the entire purchase price can be deducted in the first year. For 2025, businesses can deduct up to $1,250,000, with a phase-out beginning once total property purchases exceed $3,130,000. Property in Asset Class 57.1 qualifies for this treatment, though the deduction can also be limited if the business is not profitable.