What Is a Shipping Container’s Depreciation Life?

Depreciation is a tax deduction allowing a business to recover the cost of an asset over time as it generates income. Instead of deducting the entire cost at once, a portion is expensed each year over the asset’s useful life. Shipping containers used in a business for more than one year are depreciable property, and the annual deductions reduce a company’s taxable income.

Determining the Asset Class and Recovery Period

The Internal Revenue Service (IRS) classifies business assets into categories, each with a specific recovery period for depreciation. Under the Modified Accelerated Cost Recovery System (MACRS), shipping containers used for commercial transport fall into Asset Class 00.27. This class, which covers assets used for over-the-road cargo transportation, determines the container’s depreciable life.

MACRS includes two systems: the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). For Asset Class 00.27, GDS assigns a 5-year recovery period, which is common for containers in domestic transport. The ADS assigns a 6-year recovery period and is required for assets used mainly outside the U.S., for tax-exempt use property, or if a business elects to use it for all assets in a class.

The container’s use is important. If a container is repurposed as a stationary building or storage unit, its classification changes from transportation equipment. It may then be classified as land improvements with a 15-year GDS recovery period or as nonresidential real property with a 39-year period, altering the depreciation timeline.

Choosing a Depreciation Method

After establishing the recovery period, a business selects a depreciation method. For property under the General Depreciation System (GDS), the default method is the 200% declining balance. This accelerated method provides larger deductions in the early years of the asset’s life and smaller ones in later years, offering a greater immediate tax benefit.

Alternatively, a business can irrevocably elect the straight-line method within GDS, which spreads the deduction evenly over the recovery period. For example, a container with a $5,000 cost basis would generate a $1,000 deduction each year for five years. In contrast, the 200% declining balance method would yield a larger deduction in the first year and declining amounts thereafter.

If a business must use the Alternative Depreciation System (ADS), the straight-line method is mandatory. Using the same $5,000 container, the deduction would be spread evenly over its 6-year ADS recovery period. The choice between GDS and ADS is a strategic decision based on a business’s long-term tax planning.

Accelerated Depreciation Options

The tax code offers incentives to deduct a large portion of an asset’s cost in the first year. One is bonus depreciation, which allows an immediate deduction for a percentage of the cost of qualifying property. For property placed in service in 2025, the bonus depreciation rate is 40%.

Another tool is the Section 179 deduction, allowing a business to expense the full purchase price of qualifying equipment in the year it is placed in service. For 2025, the maximum Section 179 expense is $1,250,000. This deduction is reduced if the total cost of qualifying property placed in service during the year exceeds the $3,130,000 investment limit.

A business can use both Section 179 and bonus depreciation in the same year. A business would first apply the Section 179 deduction, and then bonus depreciation can be claimed on the remaining cost. Shipping containers are eligible for both options because their recovery period is 20 years or less, which provides flexibility in managing taxable income.

Calculating and Reporting Depreciation

To calculate depreciation, a business needs the asset’s cost basis and the date it was placed in service. The cost basis includes the purchase price plus any additional costs to make it operational, like delivery fees or sales tax. The placed-in-service date, when the container is ready for use, determines when depreciation begins and which convention to apply, such as the half-year or mid-quarter convention.

Once all factors are determined, the annual depreciation is calculated and reported to the IRS on Form 4562, Depreciation and Amortization, which is filed with the business’s tax return. Different parts of the form are used for specific deductions. A Section 179 expense is detailed in Part I, bonus depreciation in Part II, and standard MACRS depreciation in Part III. The form requires listing the asset’s cost, convention, recovery period, method, and the final deduction amount.