This paper proposes the planning method for placement of capacitors in a distribution system. The main objectives in the planning for capacitor allocation are the reduction of installation costs and electric power loss. In the proposed method, the life time of each device is considered in calculating installation costs, and the optimal operation status of devices is found by genetic algorithm. Then, the optimal numbers and locations are determined based on the optimal operation status. Simulation results in the 69-bus distribution system show that the proposed method performs better than conventional methods.