Internal structural improvements made to nonresidential buildings, excluding costs for enlargement, elevators, escalators, or internal structural framework changes, are categorized as qualified improvement property (QIP). For instance, renovations to the interior of an office building, such as new flooring, lighting, or HVAC systems, would typically fall under this classification. However, adding a new wing to the building or installing a new elevator would not.
This categorization is significant for tax purposes, impacting depreciation deductions. Understanding these distinctions allows businesses to optimize tax strategies and potentially accelerate cost recovery for eligible improvements. Historically, the tax treatment of QIP has undergone changes, impacting depreciation periods and methods. Being aware of current regulations is crucial for accurate financial planning and compliance.
