Qualified Improvement Property

Improvement to the interior portion of a nonresidential building made after the building was first placed in service. QIP has a 15-year MACRS recovery period and qualifies for §168(k) bonus depreciation. Defined at IRC §168(e)(6); excludes enlargements, elevators/escalators, and internal structural framework.

STATUTE BASIS · IRC §168(e)(6)

In context

QIP’s 15-year recovery period is what makes it bonus-depreciation-eligible. Without the 15-year designation, an interior improvement to a nonresidential building would default to 39-year structural depreciation and be ineligible for §168(k) under the 20-year-or-less requirement.

The Tax Cuts and Jobs Act of 2017 was intended to assign QIP 15-year status, but a drafting error in the bill omitted the 15-year designation. The CARES Act of 2020 corrected this retroactively, restoring QIP to 15-year property effective for property placed in service after December 31, 2017.

Taxpayers who depreciated 2018–2019 QIP as 39-year property can file Form 3115 to capture the catch-up depreciation through a §481(a) adjustment.

See /qualified-improvement-property/ for the topic hub.