A 15-year recovery period and bonus eligibility for qualifying interior improvements to nonresidential buildings — won or lost through scope definition and placed-in-service evidence.
What it is
Qualified Improvement Property (QIP) is an improvement to an interior portion of a nonresidential building, placed in service after the building was first placed in service. Under GDS it is 15-year property (20-year ADS) and, where the §168(k) requirements are met, it is bonus-eligible. It excludes building enlargements, elevators, escalators, and the internal structural framework.
Where it fits
The common fact patterns are existing nonresidential buildings where the interior is refreshed, reconfigured, or modernized — office rebuilds, lobby and corridor upgrades, retail and restaurant repositionings. The common thread is interior scope on an already-placed-in-service nonresidential building, with excluded work controlled.
Eligibility — the threshold questions
- Is the building nonresidential real property?
- Is the work tied to an interior portion of the building?
- Was the improvement placed in service after the building was first placed in service?
- Does the scope avoid the excluded categories (enlargements, elevators, escalators, internal structural framework)?
How it works in practice
Most QIP problems are file-quality problems — a bundled invoice mixing demolition, partitions, finish, structural correction, and elevator-adjacent scope. Start with procurement and accounting: a scope narrative, a qualifying-versus-excluded work matrix, consistent vendor itemization, and a closeout package tied to the ledger. Watch ADS creep: property required to use ADS loses bonus even if it otherwise fits QIP.
Documentation that holds up
- Building-classification memo confirming nonresidential status
- Project narrative and qualifying-versus-excluded scope matrix
- Vendor-level invoice detail and change-order log flagging structural or enlargement creep
- Phase-by-phase placed-in-service evidence and a depreciation/election memo
Edge cases & when another path fits
Misreading the building type, treating all interior work as qualifying, weak placed-in-service evidence, and bundled-invoice reconstruction are the predictable failures. QIP is a weaker fit when a project is dominated by enlargement, structural work, or non-interior scope — in which case a broader depreciation or cost-segregation review may be more defensible.
Frequently asked questions
Does every renovation qualify?
No — interior location alone is not enough; enlargements, elevators, escalators, and structural framework remain excluded.
Is QIP 15-year property?
Yes, under GDS (20-year under ADS), which is why it can also be bonus-eligible.
Does it apply to residential rental?
No — QIP applies to nonresidential real property.
Specific eligibility and execution thresholds vary by transaction structure, jurisdiction, and basis composition. This is a starting point for documentation discipline — not a substitute for engaged tax counsel. Nothing here is tax, legal, or investment advice.