Qualified improvement property

Most improvements to a building are stuck on the long clock: capitalize them, depreciate them over 39 years. Qualified improvement property, QIP, is the exception. It gets a 15-year life, which puts it under the 20-year ceiling for bonus depreciation, which means many interior improvements to a commercial building can be deducted in full in the first year. Understanding what counts as QIP is one of the highest-value distinctions in real estate tax, and it exists because of a mistake.

The retail glitch, a true story

When Congress wrote the 2017 tax law, it meant to give QIP a 15-year life so businesses could write off interior renovations quickly. Through a drafting error, the final text left QIP at 39 years, which also made it ineligible for bonus depreciation. This became known as the “retail glitch,” and for two years it meant a business that renovated its interior in 2018 or 2019 was stuck depreciating the work over 39 years, straight-line, exactly the opposite of what Congress intended.

The CARES Act fixed it in 2020, and did so retroactively, reaching all the way back to property placed in service after 2017, so owners could go back and claim the bonus depreciation they had been denied. The 2025 tax law then preserved the 15-year life and, alongside the permanent 100% bonus depreciation, locked in QIP’s fast treatment for good.

QIP gets a 15-year life, which is what lets it qualify for bonus depreciation, and that treatment survived a drafting error, a retroactive fix, and now permanence.

What actually counts as QIP

QIP has a precise definition, and the boundaries are where the deductions are won or lost. QIP is an improvement to the interior of a nonresidential building, made after the building was first placed in service. Three words in that sentence do heavy lifting.

Interior: only interior improvements count. New non-load-bearing walls, drop ceilings, interior lighting, flooring, interior electrical and plumbing, security and fire suppression inside the space. It specifically excludes three things even when interior: enlargements of the building, elevators and escalators, and the internal structural framework.

Nonresidential: this is the one that catches real estate investors. QIP is a commercial-property category. Interior improvements to residential rental property are not QIP, so a residential landlord’s kitchen remodel does not get the 15-year QIP treatment, though its individual components may still be reclassified through a cost-segregation study.

After the building was placed in service: improvements made in the same year the building itself was first placed in service are not QIP; they fold into the building’s 39-year basis. QIP is for improving an existing building, not finishing a new one.

QIP is interior, nonresidential, and made after the building opened; miss any of the three and the improvement drops back to the 39-year clock.

Bonus or 179, and why QIP has a choice

QIP is unusual because it qualifies for both first-year deductions, and you can choose or combine them.

Because QIP is 15-year property, it is eligible for 100% bonus depreciation, no dollar cap, and it can create a loss. It is also eligible for Section 179 expensing, which is capped and cannot create a loss but offers more selectivity. Most owners taking a large QIP deduction use bonus depreciation as the workhorse, sometimes layering Section 179 first on specific pieces. The one time you might prefer to slow down: bonus depreciation on QIP can trigger the excess business loss limitation for individual taxpayers, so in some years spreading QIP over its 15-year life, or electing a lower bonus rate, is the smarter play.

The bottom line

• QIP gets a 15-year life, which makes it eligible for 100% bonus depreciation.
• It covers interior improvements to nonresidential buildings, made after the building opened.
• It excludes enlargements, elevators, structural framework, and all residential property.
• QIP qualifies for both bonus depreciation and Section 179, and the two can be combined.
• State conformity varies, so the federal write-off may not match your state treatment.

For the improvement that is not QIP, read roof replacements. For the two first-year deductions, see Section 179 vs bonus depreciation. For the full picture, start at the depreciation and cost segregation hub.

Last verified August 2026.