100% Bonus Depreciation of Qualified Improvement Property Under CARES Act

Under Section 2307 of the CARES (Coronavirus Aid, Relief, and Economic Security) Act signed into law on March 27th, 2020, there is a significant change regarding Qualified Improvement Property (QIP). Any 39-year real property that qualifies as QIP is now assigned a 15-year recovery period and therefore is 100% bonus depreciation eligible.

QIP refers to certain interior improvements made to commercial buildings after the building is first placed in service. Examples of QIP may include floor coverings, ceilings, interior partitions, sprinklers, plumbing, HVAC, electrical and lighting. However, QIP does not include costs for elevators, escalators, structural framework or enlarging the building.

Next Steps

This 15-year recovery period and 100% bonus depreciation change to QIP is effective retroactively for property placed in service after December 31st, 2017. Real property owners or leaseholders are advised to consider any new or previous capital projects that may benefit from this change to immediately expense qualified building improvements. Taxpayers may now amend previous tax returns or file Form 3115, Application for Change in Accounting Method, to automatically correct the recovery period and claim 100% bonus depreciation.

We’re Here to Help

Richard Welling works closely with cost segregation experts Data Wise to optimize our real estate client’s cost recovery deductions. Please contact us to discuss how the CARES Act applies to your capital projects. We can assist in substantiating your QIP and preparing the automatic method change to claim your deduction.

About Data Wise

Data Wise performs cost segregation studies with an engineered tax analysis per IRS guidelines. They conduct a thorough examination of total project costs (direct and indirect), purchase and construction documents, and perform a site inspection on every study. Data Wise provides fully documented professional engineering and cost estimating procedures for allocating costs in an audit ready report.

Contact

Bob Montes, ASA

Direct: (818) 749-5273

Email: bob.montes@datawisedesign.com

Bridget Morley, PMP

Direct: (818) 749-5275

Email: bridget.morley@datawisedesign.com

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