Under MACRS, what is the depreciation period allowed for residential investment properties?

The correct choice indicates that under the Modified Accelerated Cost Recovery System (MACRS), residential investment properties are assigned a depreciation period of 27.5 years. This specific timeframe is significant because it reflects the IRS guidelines for the depreciation of residential real estate, which differs from that of non-residential properties.

Residential rental property is defined as a building or structure that is used for dwelling purposes and not exceeding four rental units. These properties are eligible for depreciation over 27.5 years, allowing property owners to recover their purchase costs gradually through annual depreciation deductions on their tax returns.

Non-residential properties, in contrast, typically have a longer depreciation period of 39 years. Understanding these distinctions within MACRS is crucial for real estate investors, as it influences their tax strategies and overall financial planning. Therefore, the 27.5-year depreciation period is integral in both calculating potential tax deductions and assessing the financial viability of residential investment properties.