Qualified Improvement Property: What Every Real Estate Investor Needs to Know
- Rick Ruberg
- Sep 9
- 3 min read
You’ve finally made the decision to give your property a facelift. Whether it’s sprucing up the lobby of your office building to wow clients or giving a rental space a makeover to draw in better-paying tenants, you’re ready to take the plunge.
You write the check, the contractors get to work, and before you know it, your property is looking absolutely stunning!
You’ve probably heard the term Qualified Improvement Property (QIP) tossed around when talking tax strategies.
If you haven’t, keep reading, because this is one of those nuggets of knowledge worth squirreling away for future use.
After reading this article, you’ll not only know what QIP is, but you’ll see how it works hand-in-hand with bonus depreciation. The goal is to turn your property upgrades into powerful deductions. Let’s jump in...
What Is Qualified Improvement Property (QIP)?
Qualified Improvement Property is any improvement made to the interior of a commercial building after it’s placed in service.
That means:
Renovating your office suite ✔
Upgrading the lobby of your retail center ✔
Putting in new lighting, drywall, or ceilings in your warehouse ✔
QIP is a broad category designed to encourage property owners to keep their commercial spaces modern and usable.
But there are some rules. QIP does NOT include:
Enlarging the building
Adding an elevator or escalator
Improvements to the building’s structural framework
To put it simply, QIP focuses on interior upgrades that don’t alter the building's core structure.
QIP + Bonus Depreciation = Tax Savings
Thanks to the Tax Cuts and Jobs Act (TCJA) and the CARES Act, QIP is classified as 15-year property.
Normally, commercial buildings depreciate over 39 years. Painfully slow! But QIP gets a 15-year recovery period, making it eligible for bonus depreciation.
This is where things get exciting.
Bonus depreciation allows you to deduct 100% of the cost of QIP immediately in the year it’s placed in service (thanks to the comeback in 2025 under the “One Big Beautiful Bill”).
Example of Bonus Depreciation at work:
You spend $500,000 upgrading the interior of your office building.
Without QIP rules:
You’d depreciate $500K over 39 years → around $12,800 deduction per year.
With QIP + 100% bonus depreciation:
You write off the entire $500K in one year.
That’s a nice reduction in taxable income, if you ask me!
How QIP Fits Into Your Real Estate Tax Strategy
Qualified Improvement Property is not just a one-off deduction. Here’s how smart investors make the most of QIP:
Pair with Cost Segregation
A cost segregation study can break down a building into shorter-life assets (5, 7, 15 years). Qualified Improvement Property adds another layer by giving you immediate deductions on interior improvements.
Plan Renovations Strategically
Instead of doing piecemeal improvements, plan them in a tax year when your income is high. You’ll get the maximum benefit from bonus depreciation.
Don’t Forget Carryforwards
If the deduction creates a loss, you can carry it forward or offset other income. This is where tax planning pays off.
Pro Tip: Work With a Team That Gets It
Qualified Improvement Property paired with bonus depreciation in 2025, creates a robust strategy that can help you speed up write-offs, lower your taxable income, and keep more $$$ flowing into your business.
Not every CPA is well-versed in how to accurately classify QIP. So, don’t just think about “renovating” your property, consider revamping your tax strategy as well. Work with an advisor who knows how to leverage bonus depreciation and structure your improvements the smart way. When you do, you’re not only renovating your property, you’re building a stronger financial future.
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