What is the IRS depreciation period for new cabinets installed in a property?
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The IRS depreciation period for new cabinets installed in a property depends on how the cabinets are classified under the Internal Revenue Code and the context in which they are used.
1. Classification of Cabinets
- Office, Retail, or Residential Rental Property: Cabinets are generally considered part of "furniture and fixtures" or "office furniture, fixtures, and equipment" if they are not permanently affixed as structural components of a building. In these cases, they are classified as tangible personal property under MACRS.
- If Cabinets Are Structural Components: If the cabinets are built-in and considered a permanent part of the building (e.g., kitchen or bathroom cabinets in residential rental property), they are treated as part of the building’s structural components and are classified as real property (§ 1250 property).
2. Depreciation Periods under MACRS
a. Tangible Personal Property (Not Structural Components)
- Asset Class 00.11 (Office Furniture, Fixtures, and Equipment): Cabinets that are not structural components fall under this class.
- GDS (General Depreciation System) Recovery Period: 7 years
- ADS (Alternative Depreciation System) Recovery Period: 10 years
b. Structural Components of a Building
- Residential Rental Property: If the cabinets are built-in and considered part of the building (e.g., kitchen cabinets in an apartment), they are depreciated as part of the residential rental property.
- GDS Recovery Period: 27.5 years
- ADS Recovery Period: 30 years (for property placed in service after 2017)
- Nonresidential Real Property: If installed in a commercial building and considered structural, the recovery period is:
- GDS Recovery Period: 39 years
- ADS Recovery Period: 40 years
3. IRS Guidance and Cost Segregation
- The IRS Cost Segregation Audit Techniques Guide and industry matrices confirm that cabinets, when not structural, are typically classified as 7-year property under MACRS (Asset Class 00.11).
- If cabinets are permanently affixed and serve as structural components (e.g., kitchen or bathroom cabinets in a rental property), they are depreciated over the same period as the building.
4. Practical Examples
- Removable Office Cabinets: 7-year GDS recovery period.
- Built-in Kitchen Cabinets in Residential Rental: 27.5-year GDS recovery period.
- Built-in Cabinets in Commercial Building: 39-year GDS recovery period.
5. Supporting Authority
- IRC §168(c): Sets the recovery periods for different classes of property.
- IRS Publication 946 and Cost Segregation Audit Techniques Guide: Confirm the classification and recovery periods for furniture, fixtures, and structural components.
Summary:
- 7 years (GDS) if the cabinets are not structural components (e.g., removable office or retail cabinets).
- 27.5 years (GDS) if the cabinets are built-in and part of residential rental property.
- 39 years (GDS) if the cabinets are built-in and part of nonresidential real property.
The correct classification depends on whether the cabinets are considered personal property or structural components of the building.
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