The CLADR Table: Find an Asset’s MACRS Recovery Period

The Role of CLADR in Modern Depreciation

The Modified Accelerated Cost Recovery System (MACRS) is the required method for depreciating most tangible property placed in service after 1986. Before MACRS, depreciation was calculated based on an asset’s specific useful life and salvage value, which created complexity for taxpayers. MACRS standardized depreciation by establishing specific recovery periods for different types of assets.

Although the Class Life Asset Depreciation Range (CLADR) system became obsolete for new assets after 1980, its “class life” designations remain a component of MACRS. The Internal Revenue Service (IRS) repurposed the CLADR class lives to serve as the reference point for assigning assets to recovery periods under the current framework. This connection is outlined in Section 168 of the Internal Revenue Code.

To determine the correct depreciation schedule for a business asset, you must first find its designated class life from the CLADR tables. This figure dictates which MACRS property class the asset belongs to and, consequently, its depreciation timeline. Without referencing the asset’s CLADR class life, a business cannot correctly classify its property under MACRS or calculate its proper annual depreciation deduction.

Determining an Asset’s Class Life

To find the correct class life for an asset, you must consult the table in Appendix B of IRS Publication 946, “How To Depreciate Property.” This table is organized by asset class numbers, which are tied to specific business activities or types of assets.

To use the table, you first locate the business activity your asset is used in. For example, assets used in construction, manufacturing, or transportation have their own specific asset classes. If an asset is used across multiple business types, you would look for one of the general asset classes that are not based on a specific industry.

For instance, office furniture is in Asset Class 00.11, which covers “Office Furniture, Fixtures, and Equipment,” and has a Class Life of 10 years. Computers and peripheral equipment fall under Asset Class 00.12, which has a Class Life of 6 years. A light-duty truck is in Asset Class 00.242, which specifies a Class Life of 5 years.

If an asset does not appear to fit into any specific class, it is considered property with no designated class life. Such property is generally assigned a specific recovery period, often 7 years under the General Depreciation System (GDS). You should thoroughly check the asset descriptions in Publication 946 before concluding an asset has no class life.

Translating Class Life to a MACRS Recovery Period

Once you have identified an asset’s class life, the next step is to convert that number into a MACRS recovery period. This translation depends on which depreciation system you are using: the General Depreciation System (GDS) or the Alternative Depreciation System (ADS). GDS is the most commonly used system because it allows for faster depreciation over a shorter recovery period.

Under GDS, class lives are mapped to specific recovery periods. An asset with a class life of 4 years or less is classified as 3-year property. An asset with a class life of more than 4 years but less than 10 years becomes 5-year property. A class life of 10 years or more but less than 16 years results in a 7-year recovery period. This is why office furniture, with its 10-year class life, is depreciated over 7 years under GDS.

Using the other examples, computers have a class life of 6 years and are treated as 5-year property under GDS. A light-duty truck with a 5-year class life also falls into the 5-year property category.

The Alternative Depreciation System (ADS) is required for certain types of property and can be elected for others. For most assets depreciated under ADS, the recovery period is equal to the asset’s class life. Therefore, office furniture with a 10-year class life would be depreciated over 10 years, and computers with a 6-year class life would be depreciated over 6 years. Property with no class life is assigned a 12-year recovery period under ADS.