Depreciation of Property Used on Indian Reservations Depreciation is a loss in the value of property over the time theproperty is being used. You can get back your cost of certain propertyby taking deductions for depreciation. This includes the cost ofcertain buildings and equipment you use in your business. Special depreciation rules apply to qualified property that youplace in service on an Indian reservation after 1993 and before 2004.Your business does not have to use the property in an empowerment zoneor enterprise community to use these special rules. These specialrules allow you to use shorter recovery periods to figure yourdepreciation deduction for qualified property. As a result, yourdeduction is larger. Qualified property.Property eligible for the shorter recovery periods is 3-, 5-, 7-,10-, 15-, and 20-year property and nonresidential real property. Youmust use this property predominantly in the active conduct of a tradeor business within an Indian reservation. Real property you rent toothers that is located on an Indian reservation is also eligible forthe shorter recovery periods. The following property is not qualified property. Property used or located outside an Indian reservation on aregular basis. Property acquired directly or indirectly from certainrelated persons. Property placed in service for purposes of conducting orhousing certain gaming activities. Qualified property also does not include any property you mustdepreciate under the Alternative Depreciation System (ADS). Determinewhether property is qualified without regard to the choice to use ADSand after applying the special rules for listed property not usedpredominantly in a qualified business (discussed in Publication 946). Qualified infrastructure property.Item (1) above does not apply to qualified infrastructure propertylocated outside the reservation that is used to connect with qualifiedinfrastructure property within the reservation. Qualified infrastructure property is property that meets all thefollowing requirements. It meets the requirements listed earlier underQualified property (except that it can be outside thereservation). It benefits the tribal infrastructure. It is available to the general public. It was placed in service in connection with the activeconduct of a trade or business within a reservation. Infrastructure property includes, but is not limited to, roads,power lines, water systems, railroad spurs, and communicationsfacilities. Recovery periods.The following table shows the shorter recovery periods you can useto depreciate qualified property. Table 6. Recovery Periods for Qualified Property Recovery Property Class Period 3-year 2 years 5-year 3 years 7-year 4 years 10-year 6 years 15-year 9 years 20-year 12 years Nonresidential real property 22 years More information.For more information about depreciation, including the specialrules that apply to property used on Indian reservations, seePublication 946, How To Depreciate Property.