Short answer
Qualified improvement property, QIP, is a statutory category for improvements made to the interior of a nonresidential building after the building was first placed in service, excluding enlargements, elevators and escalators, and the internal structural framework. It is 15-year property, depreciated straight line, and because its recovery period is 20 years or less it is qualified property for bonus depreciation, at a permanent 100 percent for property acquired after January 19, 2025. It is also eligible for the section 179 election as qualified real property. The catch for most readers of this site is in the definition: QIP applies only to nonresidential real property. An apartment building's interior renovation is not QIP; it is either part of the 27.5-year building or, item by item, 5- or 15-year property that a cost segregation study identifies. This article explains what QIP is, how it interacts with a study, and the residential exclusion that forums often get wrong. It is general education, not tax advice.
What QIP is
| Element | Rule |
|---|---|
| Building type | Nonresidential real property only |
| Location of the work | The interior portion of the building |
| Timing | Placed in service after the building was first placed in service |
| Excluded | Enlargement of the building; any elevator or escalator; the internal structural framework |
| Recovery period | 15 years, straight line; 20 years under the alternative depreciation system |
| Bonus depreciation | Eligible as qualified property; 100 percent for property acquired after January 19, 2025 |
| Section 179 | Eligible as qualified real property, subject to the section 179 limits and the trade-or-business requirement |
The category exists because Congress wanted interior improvements to commercial buildings to be recovered faster than the 39-year building. A tenant build-out in an office, a restaurant's interior renovation, a retail fit-out: these are what QIP describes.
What QIP is not
- Not residential. An improvement to an apartment building, a single-family rental or a duplex is not QIP, because those are residential rental property. Their interiors are 27.5-year building components unless a study shows an item is personal property or a land improvement on its own facts.
- Not exterior. Roofs, façades, windows and site work are outside the definition. Roofs, HVAC, fire protection and security systems on a nonresidential building have their own path to section 179 as qualified real property, but they are not QIP and not 15-year property by that route.
- Not structural. Work on the internal structural framework, enlargements, elevators and escalators are excluded.
- Not the original construction. QIP must be placed in service after the building was first placed in service; the interior of a new building is part of the building.
Where the short-term rental question comes in
Some short-term rentals are nonresidential real property, because units used on a transient basis are not dwelling units for the 80 percent test. For such a property, an interior renovation after the building was placed in service can meet the QIP definition. Whether the property is residential or nonresidential is a question of fact for your adviser, and the answer changes both the building's recovery period and the availability of QIP treatment for later interior work.
QIP and cost segregation together
A study and the QIP rules are not alternatives; they answer different questions about the same renovation.
- The repair analysis decides what is capitalized: betterments, restorations and adaptations to the building as a unit of property, with its building systems considered separately.
- Classification puts each capitalized item in its class on its function and the law. In a nonresidential building, interior work that is part of the building falls into QIP; items that are section 1245 property on their own facts, such as removable fixtures and equipment serving a business function, are 5- or 7-year property regardless of QIP; exterior and site work are outside QIP.
- Elections follow: bonus depreciation on qualified property, or a section 179 election on qualified real property where the trade-or-business and dollar limits allow, or an election out.
The study's legal analysis, which the IRS guide lists among the elements of a quality study, is where the QIP determination is written down: nonresidential, interior, after first placed in service, not excluded.
A worked contrast
An owner renovates the interior of a ground-floor retail space in a mixed-use building that is nonresidential real property. New partitions, ceilings, lighting, flooring and finishes that are part of the building are QIP: 15-year, straight line, bonus-eligible. The display cases, dedicated equipment circuits and movable fixtures are section 1245 property on their facts. The storefront glazing and the new roof are neither QIP nor 15-year property; the roof may be section 179 qualified real property. The same owner renovates the apartments upstairs, which are residential rental property: none of that interior work is QIP; the building components are 27.5-year property and the appliances, carpeting and window coverings are 5-year property through the study.
How QIP shows up on the schedule
On the depreciation schedule, QIP is its own line or lines: 15-year class, straight line, with the placed-in-service month of the improvement, not of the building, and a note of the bonus depreciation taken or the election out. That separate line matters later. When the interior is renovated again, the earlier QIP can be retired through a partial disposition rather than left depreciating under the new work, and at sale the QIP's depreciation is accounted for on its own. A study that folds QIP into the building line, or that labels every renovation dollar QIP without the legal analysis, produces a schedule that cannot do either.
Common misunderstandings
- "All interior renovations are 15-year now." Only on nonresidential buildings, only interior, only after first placed in service, and not structural.
- "QIP applies to my apartment renovation." It does not; residential rental property is excluded by definition.
- "Roof and HVAC are QIP." They are not; they are separately listed as qualified real property for section 179 on nonresidential buildings.
- "QIP replaces cost segregation." The study still separates section 1245 property and land improvements, and its legal analysis is what supports the QIP determination.
What people ask on Reddit and other forums
QIP confusion is common in the "cost segregation reddit" threads on r/tax and r/realestateinvesting. The searches that lead people to these threads are usually phrased "QIP bonus depreciation" and "QIP residential rental".
"Can I take QIP on my rental house remodel?" No. QIP applies only to nonresidential real property. The remodel's items are classified on their own facts through a study.
"My Airbnb is 39-year. Does that make my renovation QIP?" If the property is nonresidential real property on the facts, an interior improvement placed in service after the building can meet the definition, subject to the exclusions. Ask your adviser.
"Is QIP 100 percent bonus?" QIP is qualified property; for property acquired after January 19, 2025 the applicable percentage is a permanent 100 percent, subject to the transition election and the election out.
"Is a new roof QIP?" No. On a nonresidential building a roof may be section 179 qualified real property, but it is not QIP.
Questions people also ask
What is qualified improvement property?
An improvement to the interior of a nonresidential building placed in service after the building, excluding enlargements, elevators, escalators and the internal structural framework. It is 15-year property.
Does QIP apply to residential rental property?
No. The definition is limited to nonresidential real property.
Is QIP eligible for bonus depreciation?
Yes, as qualified property with a recovery period of 20 years or less; 100 percent for property acquired after January 19, 2025.
Is QIP eligible for section 179?
Yes, as qualified real property, subject to the section 179 dollar limits, the taxable income limit and the requirement that the property be used in the active conduct of a trade or business.
How does a cost segregation study treat QIP?
The study's legal analysis records the QIP determination for building-interior work on a nonresidential building and separately classifies section 1245 property and site work on their own facts.
Sources
- https://www.law.cornell.edu/uscode/text/26/168 — 26 U.S.C. §168(e)(6), §168(e)(3)(E)(vii), §168(b)(3)(G), §168(g)(3)(B), §168(e)(2)(A), §168(c), §168(k)(2)(A).
- https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill — IR-2026-06 (January 14, 2026), bonus depreciation guidance.
- https://www.law.cornell.edu/uscode/text/26/179 — 26 U.S.C. §179(d)(1) and §179(e).
- https://www.law.cornell.edu/cfr/text/26/1.263%28a%29-3 — 26 C.F.R. §1.263(a)-3(d) and (e)(2).
- https://www.irs.gov/pub/irs-pdf/p5653.pdf — IRS Publication 5653, Cost Segregation Audit Techniques Guide (Rev. 2-2025): Chapter 4.
Related reading
- Cost segregation after a renovation: improvements and partial dispositions
- Bonus depreciation and cost segregation after the 2025 law
- Section 179 versus bonus depreciation for rental property
- Short-term rentals and cost segregation
- Cost segregation for residential rental property
- What Reddit asks about cost segregation, answered with sources
- Find a practitioner in the NBCSS directory