What qualifies as a land improvement?

Sidewalks, parking lots, fences, landscaping, drainage, retaining walls, swimming pools, outdoor lighting, and similar improvements made directly to land. Land itself is never depreciable, but improvements TO land qualify for 15-year MACRS treatment when placed in service.

Is qualified improvement property (QIP) really 15-year?

Yes — the 2020 CARES Act technical correction permanently classified QIP as 15-year MACRS property (down from 39-year). QIP is any improvement made to the interior of nonresidential real property AFTER it was first placed in service. Excludes building enlargement, internal structural framework, and elevators/escalators.

Does OBBB 100% bonus depreciation apply to 15-year property?

Yes. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for property acquired and placed in service after January 19, 2025. 15-year MACRS property — including QIP and qualifying land improvements — is eligible. This effectively allows full first-year write-off rather than the 15-year recovery.

What is the difference between Section 179 and bonus depreciation for 15-year property?

Bonus depreciation can fully expense any 15-year property in year one. Section 179 can too, but only for qualified improvement property (and other qualified real property) — land improvements such as parking lots, fences and landscaping are excluded from §179 (Pub 946: "Land and land improvements do not qualify as section 179 property"). Section 179 is also capped ($2.5M for 2025 with phase-out from $4M after OBBB; $2.56M for 2026 with phase-out from $4.09M) and limited to taxable business income. Bonus depreciation has no cap, can create a net operating loss, and is now permanently 100% under OBBB for property acquired after January 19, 2025. Where both apply, taxpayers often stack: Section 179 first, bonus on the remainder.

What convention applies to 15-year MACRS property?

Half-year convention by default (one-half year of depreciation in the year placed in service and disposed of), unless more than 40% of the year's depreciable basis (not counting residential rental and nonresidential real property, or property placed in service and disposed of in the same year) is placed in service in Q4 — then the mid-quarter convention applies to that year's non-real MACRS property. Exactly 40% still uses half-year. Real property always uses mid-month (IRC §168(d)).

Depreciation

15-Year MACRS Property Guide (2026)

Land improvements, qualified improvement property (QIP), and the OBBB 100% bonus depreciation interaction.

Updated August 24, 2026Reviewed for 2026 tax yearIRS-sourcedReviewed by Adam Khale

The 15-year MACRS class is the most valuable depreciation bucket for real estate investors after OBBB. Properly classifying assets — sidewalks, parking lots, interior tenant improvements — into this class instead of 27.5- or 39-year unlocks 100% first-year deduction under restored bonus depreciation. We've cross-referenced IRC §168, Publication 946 (2025), and Rev. Proc. 87-56 to assemble this reference.

100%

First-year bonus depreciation post-OBBB

About Our Editorial Process

What is 15-year MACRS property?

15-year MACRS is a depreciation recovery class for assets like land improvements (sidewalks, parking, landscaping) and qualified improvement property (interior nonresidential improvements); the restaurant and retail classes apply only to property placed in service before 2018. Under OBBB-restored 100% bonus depreciation, qualifying 15-year property acquired after January 19, 2025 can be fully expensed in the year it is placed in service.

•Land improvements: parking lots, fences, landscaping, sidewalks
•QIP: interior nonresidential improvements after building placed in service
•150% declining-balance method, half-year or mid-quarter convention
•100% bonus depreciation eligible (OBBB, if acquired after Jan 19, 2025)
•Section 179: QIP only (land improvements excluded) ($2.5M cap for 2025; $2.56M for 2026)

Run Rental Depreciation Calculator

The 15-year MACRS class is where most landlords leave the biggest single source of accelerated depreciation on the table. Land improvements — fences, parking lots, landscaping, exterior lighting, sidewalks — depreciate over 15 years (not 27.5) and qualify for bonus depreciation. A cost segregation study finds them; most DIY landlords don't.

Real-world scenario

Duplex purchase with $48K of identifiable 15-year property

Without cost seg: $48K is buried in the 27.5-year building basis, depreciated at ~$1,745/year. With cost seg + 100% bonus depreciation (restored under OBBBA for property acquired after Jan 19, 2025): the full $48K deducts in year one. Whether that cuts this year's tax depends on the passive-loss rules: at 32% marginal + 5% state, if the loss is usable (you have passive income to absorb it, qualify as a real estate professional, or your MAGI is under $100,000 for the $25,000 allowance), it's worth ~$17,760 now vs. $645 the slow way; otherwise it carries forward as a suspended passive loss until you have passive income or sell. ROI on a $4K cost seg study, if the loss is usable: 4x in year one.

The part most people miss

The IRS treats land itself (not improvements) as non-depreciable forever. The county tax assessor's land/improvement split is often wrong — usually overstating land to spread the burden. Get an independent allocation (appraisal or cost seg) for the closing year; that allocation drives 27.5 years of depreciation, so getting it right once is worth thousands.

What Qualifies as 15-Year Property

Land Improvements

• Parking lots
• Sidewalks & curbs
• Fences & gates
• Landscaping
• Drainage & retaining walls
• Outdoor lighting
• Swimming pools

Qualified Improvement Property (QIP)

• Interior improvements
• Nonresidential buildings only
• Made AFTER first placed in service
Excludes: enlargements, internal structural framework, elevators/escalators

Other 15-Year Assets

• Qualified restaurant property (legacy)
• Qualified retail improvement (legacy)
• Certain electric transmission
• Natural gas distribution lines

What is Qualified Improvement Property (QIP)?

QIP is any improvement made by the taxpayer to the interior portion of a nonresidential building, placed in service AFTER the building was first placed in service. The 2020 CARES Act technical correction reclassified QIP from 39-year to 15-year MACRS retroactive to 2018 — making it bonus-depreciation eligible. Excludes building enlargements, internal structural framework, and elevator/escalator installation.

•Must be placed in service AFTER the building's original placed-in-service date
•Nonresidential only — no residential rental QIP
•Recoverable over 15 years using 150% declining-balance method
•Eligible for 100% bonus depreciation under OBBB (if acquired after Jan 19, 2025)
•Cannot include building enlargement, internal structural framework, or elevators/escalators

Source: IRC §168(e)(6), CARES Act §2307, OBBB §70301

OBBB 100% Bonus Depreciation Interaction

The One Big Beautiful Bill Act (signed July 4, 2025) permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. The acquisition date is what counts, and a written binding contract signed earlier fixes it (P.L. 119-21 §70301(c)). Property acquired before January 20, 2025 stays on the old phase-down schedule: 40% if placed in service during 2025, 20% during 2026, and nothing after 2026.

Bonus Depreciation Rate by Acquisition Date

Acquired / placed in service	Bonus Rate
Acquired before 1/20/2025, placed in service in 2025	40%
Acquired before 1/20/2025, placed in service in 2026	20%
Acquired after 1/19/2025 (OBBB)	100% (permanent)

Acquisition date = the date a written binding contract was signed, if earlier. Long production period property and certain aircraft run one year behind this schedule (IRS Topic 704; Pub. 946).

Election out

You may elect OUT of bonus depreciation on a class-by-class basis (e.g., elect out for all 15-year property but keep it for 5-year property). Election is irrevocable and made on the timely-filed return. Useful when current-year losses already exceed taxable income.

15-Year MACRS Depreciation Schedule (Half-Year Convention)

150% declining-balance method, switching to straight-line for the year that maximizes deduction.

Recovery Year	Depreciation %
1	5.00%
2	9.50%
3	8.55%
4	7.70%
5	6.93%
6	6.23%
7	5.90%
8	5.90%
9	5.91%
10	5.90%
11	5.91%
12	5.90%
13	5.91%
14	5.90%
15	5.91%
16	2.95%

Source: IRS Publication 946, Table A-1 (15-year, half-year convention).

Worked Example

You purchase a $1,000,000 commercial building in March 2026. A cost-segregation study identifies $150,000 of land improvements (parking lot, landscaping, exterior lighting) as 15-year MACRS property.

Land improvements (15-year)$150,000

100% OBBB bonus depreciation$150,000

Year-1 deduction (without bonus)$7,500 (5%)

Year-1 tax savings @ 32% bracket, if the loss is usable this year~$48,000

A rented building is a passive activity for most owners. The bonus deduction beyond the building's own net rental income saves tax this year only if you have other passive income to absorb it or qualify as a real estate professional; otherwise it becomes a suspended passive loss that carries forward until you have passive income or sell. Check it with the Passive Loss Calculator.

The 39-year building shell ($850K) still depreciates over 39 years — only the cost-segregated 15-year and 5/7-year components qualify for bonus.

Frequently Asked Questions

Rental Depreciation Calc

Estimate annual deduction

Depreciation Recapture

How recapture is taxed at sale

Rental Depreciation Guide

27.5-year residential rules

Sources & References

Primary references used for this content

Publication 946

How To Depreciate Property

MACRS recovery periods, conventions, and bonus depreciation

View on irs.gov

IRC §168

Accelerated cost recovery system

MACRS class lives and recovery periods

View on law.cornell.edu

✓2 primary sources; links re-checked on a weekly rotation by the source watcher

Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.