Qualified Improvement Property

As discussed in our post on March 31, 2020, the federal law enacted on March 27, 2020 retroactively fixed a drafting error related to qualified improvement property in the Tax Cuts and Jobs Act of 2017.

Qualified improvement property is eligible for bonus depreciation retroactively effective to January 1, 2018.  In addition, also retroactively effective to January 1, 2018, the depreciable life of such property is 15 years.  (If a taxpayer uses the §179 election to fully expense the cost of such improvements or uses 100% bonus depreciation, there will be no basis remaining to be depreciated.  However, for taxpayers with any remaining basis after §179 and/or those who elect out of bonus depreciation, the remaining basis is depreciated over 15 years.)

The IRS has issued guidance in Revenue Procedure 2020-25 setting forth procedures for taxpayers to amend prior-year returns or change accounting method to reflect this retroactive change.