The four conditions
An improvement is QIP only when all four are true:
- Nonresidential. The building is nonresidential real property, such as an office, retail store, restaurant or warehouse. Residential rental buildings do not have QIP.
- Interior. The improvement is to an interior portion of the building. Roofs, facades, parking and other exterior work are not QIP.
- Made by the taxpayer. You made the improvement. Work the seller completed before you bought the building is part of your acquisition basis, not your QIP.
- After the building's first use. The improvement is placed in service after the date the building was first placed in service by anyone. The clock is the building's, not yours: a buyer who improves an existing building before opening it can still have QIP.
What is excluded
Even inside a nonresidential building, three kinds of improvement are never QIP:
- An enlargement of the building.
- Any elevator or escalator.
- The internal structural framework of the building.
Work that fails any condition, or falls into an exclusion, keeps its structural life: 39 years for a nonresidential building.
How QIP is depreciated
| Recovery period | 15 years under the general depreciation system; 20 years under the alternative depreciation system |
| Method and convention | Straight-line, generally with the half-year convention (mid-quarter when triggered) |
| Bonus depreciation | Eligible, at the rate set by the improvement's own acquisition and placed-in-service dates; see bonus depreciation in 2026 |
| Section 179 | QIP can also be expensed under the Section 179 election, within its dollar and business-income limits |
QIP's 15-year life is the result of the 2020 CARES Act correction, which applies retroactively to QIP placed in service after 2017. Your CPA can correct earlier years' treatment of such property through an accounting method change; see Form 3115 and the §481(a) catch-up.
Roofs: not QIP, but not necessarily 39-year
A roof is generally not QIP, because QIP must improve an interior portion of the building. That is a different question from whether the roof can be deducted sooner. For nonresidential real property, a roof placed in service after the building was first placed in service can be eligible for the Section 179 expensing election as qualified real property, along with HVAC property, fire protection and alarm systems, and security systems. That election is a separate doctrine with its own annual dollar limit and business-income limitation, so "not QIP" does not mean "no accelerated treatment." Confirm the election with your CPA (IRS Publication 946; IRS Topic 704).
QIP inside a cost segregation study
A study does not treat an interior build-out as one asset. Separately identifiable personal property inside the project, such as equipment and certain fixtures, keeps its own 5- or 7-year life, and land improvements keep their 15-year life. The interior building work that meets every QIP condition is then classified as QIP, and anything that does not keeps its structural life. Whether a given improvement qualifies is decided on its facts (what was built, where, by whom and when), which is why a study asks for the dates and the cost breakdown.
For leased space, the question of who depreciates the build-out comes first: generally whoever paid for it. See tenant improvement cost segregation and who depreciates a build-out, landlord or tenant.