Qualified Improvement Property Eligible for Bonus Depreciation

The CARES Act provided a technical correction for Qualified Improvement Property (QIP) that enables taxpayers to claim 100% bonus depreciation on eligible improvements. This change was made retroactive to property placed in service on or after January 1, 2018.

About the Provision

After the Tax Cuts and Jobs Act (TCJA), the various pre-existing categories (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) were replaced with one category called Qualified Improvement Property (QIP). The tax law change had intended for QIP to be classified as 15-year life property, eligible for 100% bonus depreciation. However, it was erroneously classified as 39-year depreciable property,

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Changes to the Qualified Improvement Property (QIP) Classification under the Tax Cut and Jobs Act

Those who were using the Qualified Improvement Property (QIP) classification for bonus depreciation should take note of changes brought by the Tax Cut and Jobs Act (TCJA).

Where We Were…

Qualified Improvement Property (QIP) isn’t entirely new. The 2015 PATH Act created qualified improvement property, which is “any improvement to an interior portion of a building that is nonresidential real property if the improvement is placed in service after the date the building was first placed in service.” Excluded from QIP is any enlargement to the building, improvements to escalators or elevators and internal structural framework.  Under the 2015 PATH Act, QIP was eligible for bonus depreciation and depreciated over 39 years.

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