Cost Segregation Study

§ 168. Accelerated cost recovery system(a) General ruleExcept as otherwise provided in this section, the depreciation deduction provided by section 167(a) for any tangible property shall be determined by using—(1) the applicable depreciation method, (2) the applicable recovery period, and (3) the applicable convention. (b) Applicable depreciation methodFor purposes of this section—(1) In generalExcept as provided in paragraphs (2) and (3), the applicable depreciation method is—(A) the 200 percent declining balance method, (B) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of such year will yield a larger allowance. (2) 150 percent declining balance method in certain casesParagraph (1) shall be applied by substituting “150 percent” for “200 percent” in the case of—(A) any 15-year or 20-year property not referred to in paragraph (3), (B) any property (other than property described in paragraph (3)) which is a qualified smart electric meter or qualified smart electric grid system, or (C) any property (other than property described in paragraph (3)) with respect to which the taxpayer elects under paragraph (5) to have the provisions of this paragraph apply. (3) Property to which straight line method appliesThe applicable depreciation method shall be the straight line method in the case of the following property:(A) Nonresidential real property. (B) Residential rental property. (C) Any railroad grading or tunnel bore. (D) Property with respect to which the taxpayer elects under paragraph (5) to have the provisions of this paragraph apply. (E) Property described in subsection (e)(3)(D)(ii). (F) Water utility property described in subsection (e)(5). (G) Qualified improvement property described in subsection (e)(6). (4) Salvage value treated as zeroSalvage value shall be treated as zero. (5) ElectionAn election under paragraph (2)(D) 11 See References in Text note below. or (3)(D) may be made with respect to 1 or more classes of property for any taxable year and once made with respect to any class shall apply to all property in such class placed in service during such taxable year. Such an election, once made, shall be irrevocable. (c) Applicable recovery periodFor purposes of this section, the applicable recovery period shall be determined in accordance with the following table: In the case of:The applicablerecovery periodis: 3-year property3 years   5-year property5 years   7-year property7 years   10-year property10 years   15-year property15 years   20-year property20 years   Water utility property25 years   Residential rental property27.5 years   Nonresidential real property39 years. Any railroad grading or tunnel bore50 years. (d) Applicable conventionFor purposes of this section—(1) In generalExcept as otherwise provided in this subsection, the applicable convention is the half-year convention.