Qualified improvement property 15 year recovery period
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Qualified improvement property 15 year recovery period

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Qualified Improvement Property (QIP) refers to any improvement made to the interior portion of a non-residential building, provided the improvement is placed in service after the building was first placed in service by any taxpayer.

The Tax Cuts and Jobs Act (TCJA) of 2017 intended to assign a 15-year recovery period to QIP, making it eligible for 100% bonus depreciation. However, due to a drafting error, QIP was assigned a 39-year recovery period, making it ineligible for bonus depreciation.

This error was corrected by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted on March 27, 2020. The CARES Act retroactively assigned QIP placed in service after 2017 to the 15-year category, making it eligible for bonus depreciation.

Therefore, taxpayers who previously filed two or more returns using the incorrect depreciation period of 39 years for QIP are required to file an accounting method change on Form 3115 to claim bonus depreciation and/or depreciation based on the 15-year recovery period. If only one erroneous return has been filed, either Form 3115 or an amended return may be filed.
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