The new tax law simplifies previous categories of building improvement property and Qualified Leasehold Improvements. Starting with assets placed in service January 1, 2018, there is now just one category. This category is known as Qualified Improvement Property (QIP).
QIP is defined as any improvement made to the interior portion of a non-residential building after the date the building was first placed in service. However, there are a few exclusions:
- Building enlargements
- Elevators and escalators
- Costs attributable to the internal structural framework of a building
QIP is depreciated over a 39-year life and is eligible for Section 179. A qualifying building improvement that used to take over 39 years now has potential to be fully deducted in the year of the improvement.
One thing to note: The original intent for the QIP was to change the class to a 15-year life, but due to a drafting error, it’s still in the code as a 39-year life. As of this article, no technical corrections have been made.