Home/The Strategy Room/QIP Guide Qualified Improvement Property
Every Improvement to a Nonresidential Building
May Be Worth 15 Years - Not 39.
If you have ever renovated a tenant space or upgraded the interior of a nonresidential building, this page is for you. Qualified Improvement Property — QIP — qualifies for 15-year depreciation and 100% bonus depreciation. That is not the same as the standard 39-year building classification.
15-Year QIP Recovery Period
100% Bonus Eligible
CARES Act Retroactive Fix
Nonresidential Buildings Only
125+ Audits Defended
What QIP Is
You Spent Money Improving That Building. The IRS Lets You Take It All Back in Year One. Permanantly.
Qualified Improvement Property is any improvement made to the interior of a nonresidential building after it was placed in service — walls, ceilings, flooring, electrical, HVAC components, and more. QIP carries a 15-year depreciation schedule and is fully eligible for bonus depreciation.
The One Big Beautiful Bill Act made it permanent. Signed July 4, 2025, the OBBBA permanently restored 100% bonus depreciation for QIP acquired and placed in service after January 19, 2025. No phase-down schedule. No expiration date. Every qualifying interior improvement can be deducted in full in the year it is placed in service — and that is now the permanent rule going forward.
39 yrs
What improvements were classified as before QIP
15 yrs
What QIP is classified as after CARES Act — retroactive to Jan 1, 2018
100%
Bonus depreciation eligible — full deduction in year placed in service (2025)
Does My Project Qualify? — 4 Questions
Find Out in 30 Seconds Whether Your Improvement Is QIP.
The IRS defines Qualified Improvement Property in four requirements under IRC §168(e)(6). Answer the four questions below. If all four are yes — your improvement is QIP, qualifies for 15-year depreciation, and is eligible for 100% bonus depreciation in the year it is placed in service.
Yes — proceed to Question 2
Interior improvement confirmed.
Work to the inside of the building qualifies. Move to the next question.
No — does not qualify as QIP
Exterior work is not QIP.
Roofs, exterior walls, exterior lighting, parking lots, and site work are not QIP. They may qualify under other depreciation rules — ask your CPA.
Examples
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Interior walls, ceilings, flooring, finishes
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Roof replacement or new exterior wall
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Interior lighting, millwork, built-ins
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Parking lot, sidewalk, exterior signage
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Interior electrical, plumbing, HVAC distribution
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Structural HVAC unit (rooftop, chiller)
Yes — proceed to Question 3
Nonresidential building confirmed.
Commercial, office, retail, industrial, hotel — QIP applies. Move to the next question.
No — does not qualify as QIP
Residential property is excluded.
QIP applies to nonresidential property only. Apartments, condominiums, and single-family rentals do not qualify. Mixed-use buildings: only the nonresidential portion qualifies.
Examples
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Office building, medical office, retail store
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Apartment complex, condominium
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Hotel, warehouse, industrial facility, restaurant
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Single-family rental, vacation rental
Yes — proceed to Question 4
Timing requirement confirmed.
The improvement came after the building was in use. Move to the final question.
No — does not qualify as QIP
Simultaneous construction excluded.
Improvements completed as part of the original construction — placed in service at the same time as the building itself — do not qualify as QIP. They may qualify under new construction cost segregation rules instead.
Examples
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Renovating a tenant space in an existing building you own or lease
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Interior finishing done during original new construction
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Retrofitting an office built in 2010 with new finishes in 2025
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Buildout completed the same year the new shell was finished
Yes — your improvement is QIP
All four tests passed.
Your improvement qualifies as Qualified Improvement Property under IRC §168(e)(6). See the result section below.
No — this specific item is excluded
Building enlargements and vertical transport are excluded.
The portion of work that constitutes a building addition, elevator, or escalator installation does not qualify as QIP. Other interior improvements in the same project may still qualify separately.
Examples
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New interior walls, flooring, lighting within existing footprint
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New building addition that expands the square footage
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Tenant improvement within existing leased space
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New elevator installation or escalator
All Four Questions — Yes
Your improvement is Qualified Improvement Property. Here is what that means.
Under IRC §168(e)(6) and the CARES Act correction (effective retroactively to January 1, 2018), your interior improvement to a nonresidential building is classified as 15-year MACRS property — not 39-year. With 100% bonus depreciation now permanently restored under the One Big Beautiful Bill Act, qualifying improvements placed in service after January 19, 2025 can be fully deducted in Year 1.
15 yr
Recovery period — down from 39 years
100%
Bonus depreciation — full deduction Year 1
$127K
Year-1 savings on a $400K TI at 37% bracket
Common Real-World QIP Scenarios
Qualifies as QIP
Office Tenant Improvement
A tenant retrofits their leased office space — new walls, flooring, lighting, ceiling tiles, and millwork in an existing commercial building. All interior. Nonresidential. After original CO. No enlargement. QIP. Full bonus in Year 1.
Qualifies as QIP
Restaurant Renovation
Owner renovates an existing restaurant location — new flooring, bar buildout, kitchen interior upgrades, lighting. Interior of a nonresidential building placed in service years earlier. No structural expansion. QIP on all qualifying interior items.
Does Not Qualify as QIP
New Building Addition
Owner builds a new 2,000 SF addition to an existing retail store. The addition is a building enlargement — explicitly excluded from QIP. May qualify under standard cost segregation as new construction instead.
Does Not Qualify as QIP
Apartment Complex Renovation
Owner renovates individual apartment units — new flooring, paint, kitchen upgrades. The property is residential rental — QIP applies to nonresidential property only. May still benefit from cost segregation under 27.5-year rules.
Legal basis — verified by independent tax law review
Statutory authority: IRC §168(e)(6). QIP is defined as any improvement to an interior portion of a building that is nonresidential real property, placed in service after the building's original placed-in-service date, and not an enlargement of the building, not an elevator or escalator, and not attributable to the internal structural framework of the building. The fourth exclusion (internal structural framework) has been noted in the legal footnote — it rarely applies to typical tenant improvement scenarios but is part of the complete statutory definition. 15-year recovery period: CARES Act §2307, effective retroactively to January 1, 2018. 100% bonus depreciation: One Big Beautiful Bill Act, effective January 19, 2025. This decision tree is for informational purposes only and does not constitute tax or legal advice. Consult a qualified CPA or tax attorney to confirm QIP classification for your specific project.
Your Improvement Qualifies — Now Find Out What It Is Worth
Free Analysis in 24 Hours. We Tell You the Exact Deduction Before You Commit.
A free Cost Seg America proposal tells you exactly what your improvement qualifies for — Year 1 deduction, flat fee, and timeline — before you commit to anything.
The $400,000 Worked Example
Same Building. Same Improvement. Three Completely Different Tax Outcomes.
A $400,000 office suite renovation in a nonresidential building placed in service in 2025. Investor tax bracket: 37%.
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No Cost Segregation
All $400K at 39 years. Year-1 deduction: $3,795. Tax savings: $1,404.
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Cost Seg, No Bonus
QIP at 15 years + 5-year personal property. Year-1 deduction: $34,333. Tax savings: $12,703.
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Cost Seg + 100% Bonus
$260K QIP + $85K 5-year fully expensed year 1. Year-1 deduction: $345,000. Tax savings: $127,650.
What Qualifies as QIP
The Interior Improvements That Qualify — and What Does Not.
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Interior walls, ceilings, flooring, and finishes
Any interior improvement to a nonresidential building — framing, drywall, flooring, acoustic ceilings, interior doors.
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Interior lighting
Lighting fixtures installed as part of a tenant improvement or interior renovation. Specialty lighting may qualify as 5-year personal property.
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Roof, HVAC, elevators
These do not qualify as QIP. Enlargements of the building are also excluded. The improvement must be to the interior of an existing nonresidential building.
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Residential property
QIP applies to nonresidential property only. Apartments, condos, and single-family rentals do not qualify for QIP treatment.
QIP — 15-Year — 100% Bonus Eligible
Find Out What Your Improvement Qualifies For.
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