An asset's useful life

Depreciation (the process of deducting the purchase price of a fixed asset over several accounting periods) amounts are based in part upon an estimate of the useful life of a fixed asset (property used in a productive capacity which will benefit the enterprise for longer than one year). In accounting terminology, this is known as the recovery period.

It's common practice for accountants to use recovery periods published by the IRS as a guideline, even when doing book depreciation. GAAP (generally accepted accounting principles) allows you to depart from these recovery periods if you expect the useful life to be a few years more or less than what the table says. The maximum allowable useful life is forty years. The minimum is one.

The table below was compiled from a list of recovery periods that the IRS allows. Find the useful life for your asset in this table, or refer to Appendix B of IRS Publication 946 for additional guidance on estimating useful life.

Useful lives of common assets