If you’ve made interior improvements to your commercial building, you could be sitting on a major tax opportunity without realizing it. Thanks to Qualified Improvement Property (QIP) rules, many of these improvements can be depreciated over just 15 years — and with 100% bonus depreciation permanently reinstated under the July 2025 One Big Beautiful Bill Act (OBBBA), you may be able to expense them in full in the first year.

When combined with cost segregation, QIP can dramatically boost your cash flow while reducing your tax bill.

What Is Qualified Improvement Property (QIP)?

QIP is defined as any improvement made to the interior portion of a nonresidential building after it has been placed in service. To qualify, the improvements must:

• Be made after the building was first placed in service
• Be to the interior of the property
• Not be related to elevators/escalators, internal structural framework, or building expansions
  

Common examples of QIP include:

• Interior drywall and partition walls
• Ceilings, flooring, and lighting systems
• Plumbing and electrical upgrades
• Interior finishes and millwork

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How QIP Works With Bonus Depreciation

QIP was established under the CARES Act for property placed in service as of January 1, 2018 meeting the definition under IRC Section 168(e)(6). Given QIP is depreciated over a 15-year life, it is eligible for bonus depreciation at the applicable federal rate.

Under OBBBA, QIP placed in service after January 19, 2025 are eligible for 100% bonus depreciation — meaning you can deduct the entire cost in the same year.

Example: If you spent $500,000 upgrading the lighting, flooring, and ceilings in your office building in 2025 (if the property is placed in service after January 19, 2025), you could deduct the entire $500,000 that year, reducing taxable income and freeing up capital for other investments.

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Why Combine QIP With Cost Segregation?

While QIP already offers accelerated deductions, cost segregation goes a step further by identifying other short-life assets in your property that also qualify for bonus depreciation.

The combined benefits include:

• Capturing all eligible deductions in one coordinated strategy
• Maximizing first-year tax savings
• Increasing after-tax cash flow for reinvestment
  
  

Best Practices for Claiming QIP Deductions

To ensure you receive the full benefit without IRS pushback, follow these guidelines:

1. Document All Improvements – Keep invoices, contracts, and descriptions of each improvement.
   
2. Work With a Qualified Cost Segregation Firm – They can verify which items qualify as QIP and which fall under other short-life categories.
   
3. Coordinate With Your CPA – Ensure proper filing, including any necessary Form 3115 for method changes on property placed in service in a prior tax year.

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Who Benefits Most From QIP?

QIP offers significant value for:

• Retail store remodels
• Office renovations
• Restaurant upgrades
• Hotel interior improvements
• Industrial facility interior retrofits
  
  

If you own or manage commercial real estate, QIP could be one of the most overlooked—and most profitable—tax opportunities available to you.

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Make Your Renovations Pay You Back

Renovating your property is an investment in appearance, function, and tenant satisfaction. But with QIP and cost segregation, it can also be an investment in your bottom line.

Our team can:

• Review your renovations to identify QIP opportunities
• Perform a full cost segregation study to capture all eligible deductions
• Coordinate with your CPA to ensure everything is IRS-compliant
  

Let’s make your property improvements work harder for you. Contact us today to see how much you can save.

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