Real Estate qualified improvement property eligible for faster depreciation

New Law Retroactively Fixes QIP Drafting Mistake

 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains several tax relief provisions for businesses hit by the coronavirus (COVID-19) crisis. One such provision is a technical correction that makes real estate qualified improvement property eligible for faster depreciation. This article explains what’s changed and why you may need to file an amended tax return to take advantage of this development.

 

Background – when drafting the Tax Cuts and Jobs Act (TCJA) in 2017, members of Congress made it clear that they intended to allow 100% first-year bonus depreciation for real estate QIP placed in service in 2018 through 2022. Congress also intended to give you the option of claiming 15-year straight-line depreciation for QIP placed in service in 2018 and beyond.

 

QIP is defined as an improvement to an interior portion of a nonresidential building that’s placed in service after the date the building was first placed in service. However, QIP doesn’t include any expenditures attributable to:

 

  • The enlargement of the building,
  • Any elevator or escalator, or
  • The building’s internal structural framework.

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