UPDATE: Bonus Depreciation on Qualified Improvement Property

Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, changes were made to legislation surrounding bonus depreciation on Qualified Improvement Property (QIP), originally established by the 2017 Tax Cuts and Jobs Act (TCJA). This is great news all around but especially for the restaurant industry.

The CARES Act fixed the long-awaited technical correction allowing QIP to be depreciated over 15 years and making it eligible for 100% bonus depreciation. The CARES Act also expanded upon the definition of QIP, saying that the improvement has to be made by the taxpayer (i.e., purchased leasehold improvements (LHI) do not qualify). As a result of this change in definition, purchased LHI are depreciated over 39 years and do not qualify for bonus or section 179 of the IRS code.

One motive behind this change was to encourage taxpayers to invest in their properties. QIP includes improvements made to existing real property (nonresidential) and examples include interior doors, ceilings, drywall, electrical, plumbing, etc. Items specifically not included are improvements made to the structural framework, external improvements, expansions/additions, installation of elevators or escalators, to name a few.

In case you were wondering, tenant improvement (TI) allowances may qualify if the taxpayer is the owner at the time of the improvement (vs. purchased) and other QIP requirements are met.

A brief history of QIP: between January 1, 2016, and September 27, 2017, QIP had a 39-year recovery period with a 50% bonus. Between September 28, 2017, and December 30, 2017, QIP had a 39-year recovery period and was eligible for a 100% bonus. With the CARES Act, QIP placed in service in 2018 now has a 15-year recovery period and is eligible for 100% bonus.

Have questions? Please reach out to HORNE Tax Partner Dustin Taylor.

 
 
 
 
 
 

READ MORE OF OUR LATEST INSIGHTS

SEE AROUND CORNERS.
INDUSTRY EXPERTISE DELIVERED.

More Insights

[Webinar] Stay Ahead or Fall Behind: Tools to Thrive in Constant Change

Change is inevitable—but thriving through it is a skill. Whether it’s new leadership, shifting business strategies, or industry disruptions, how...

READ MORE

HORNE Gives Back to Four Non-Profits

HORNE announced its support of four charities in Alabama, Tennessee and Texas. Fueled by the HORNE Community Foundation, the 2025 first-quarter...

READ MORE

Converting to QuickBooks Online: What You Need to Know

Over the past few years, business owners have been quietly nudged to switch from QuickBooks Desktop to QuickBooks Online (QBO). Whether it’s your...

READ MORE

Strong Leader vs. Ineffective Leader Framework

How effective is your leadership? This framework outlines the key traits that separate strong leaders from ineffective ones, helping construction...

READ MORE

Economic Newsletter for the Construction Industry – March 2025

CICPAC, in collaboration with economist Dr. Chris Kuehl and Armada CI, has launched the 2025 quarterly economic report that specifically targets the...

READ MORE

The House of Medicaid Rests on Five Pillars: Service Delivery

As the U.S. House of Representatives returns from its District Work Period, its top priority will be to assemble its budget reconciliation package....

READ MORE

Talk to an expert today.