QIP (Qualified Improvement Property): Definition and Tax Treatment (2025)

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H1

QIP (Qualified Improvement Property): Definition and Tax Treatment

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ANSWER SECTION

Qualified Improvement Property (QIP) is any improvement made by the taxpayer to the interior portion of a nonresidential building that is placed in service after the building was first placed in service. QIP is depreciated over 15 years using MACRS (instead of 39 years for nonresidential real property), making it eligible for Section 179 expensing and bonus depreciation. QIP excludes improvements related to elevators, escalators, building enlargements, and the internal structural framework.

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H2: What Qualifies as QIP?

To qualify as QIP, improvements must meet all these requirements:

QIP Requirements:

1. Made to interior of nonresidential building
2. Building was already in service when improvement made
3. Improvement made by the taxpayer (not previous owner)
4. Improvement placed in service after 2017

What Counts as QIP:

• Interior renovations and remodeling
• New flooring and carpeting
• Lighting upgrades
• Plumbing improvements (non-structural)
• HVAC improvements (non-structural)
• Interior walls and partitions
• Ceiling improvements
• Security systems

What Does NOT Count as QIP:

• Elevators and escalators
• Building enlargements (additions)
• Internal structural framework
• Exterior improvements
• Improvements to residential property

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H2: Tax Benefits of QIP Classification

QIP status provides significant tax advantages:

15-Year Recovery Period:

Depreciation Method	Annual Write-Off
Year 1 (with bonus)	Up to 40% + regular MACRS
Without bonus	Faster than 39-year property

Eligibility for Section 179:

• 2025 limit: $1,250,000
• Can deduct full QIP cost immediately
• Subject to business income limitation

Bonus Depreciation (2025):

• 40% of QIP cost can be bonus depreciated
• Phasing down from 100% (2022)
• No dollar limit

Comparison: QIP vs. Regular Building Improvements

Feature	QIP (15-year)	Regular (39-year)
Recovery period	15 years	39 years
Eligible for Section 179	Yes	No
Eligible for bonus depreciation	Yes	No
Year 1 write-off potential	Up to 100%+	~2.56%

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H2: QIP vs. Related Property Categories

QIP is often confused with similar categories:

Category	Recovery Period	Section 179?	Key Difference
QIP	15 years	Yes	Interior only, after building in service
Qualified Leasehold Improvement	N/A	No	Pre-2018 category, now QIP
Qualified Restaurant Property	15 years	No	Restaurant-specific, pre-2018
Qualified Retail Improvement	N/A	No	Retail-specific, pre-2018
Nonresidential Real Property	39 years	No	Building structure itself
Land Improvements	15 years	Yes	Exterior (parking, landscaping)

Historical Context: The Tax Cuts and Jobs Act of 2017 consolidated prior categories (qualified leasehold, restaurant, and retail improvements) into the single QIP category starting in 2018.

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H2: How to Claim QIP Deductions

Step 1: Identify QIP Expenditures

• Review construction and improvement invoices
• Separate QIP from structural improvements
• Document that building was already in service

Step 2: Choose Deduction Method

1. Section 179: Up to $1,250,000 immediate expensing
2. Bonus Depreciation: 40% of remaining cost
3. Regular MACRS: 15-year depreciation on remainder

Step 3: File Proper Forms

• Form 4562: Depreciation and Amortization
• Report QIP on separate line
• Attach supporting documentation

Example Calculation: $100,000 interior office renovation:

1. Section 179: $100,000 (if under limit)
   • Total Year 1 deduction: $100,000
2. Or with bonus depreciation:
   • Bonus (40%): $40,000
   • MACRS Year 1 (20% of $60,000): $12,000
   • Total Year 1: $52,000

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H2: Related Tax Questions

For complete MACRS depreciation rules and recovery periods, see our guide on MACRS depreciation with calculation methods and tables.

Learn about closing cost deductibility including building improvements in our guide on are closing costs tax deductible with residential and commercial property rules.

For information on unreimbursed employee expenses related to property improvements, see our guide on unreimbursed employee expenses with current limitations.

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