Can a taxpayer fully expense a metal steel building using Section 179 or bonus depreciation in the year it is placed in service?
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A taxpayer’s ability to fully expense a metal steel building in the year it is placed in service using Section 179 or bonus depreciation depends on the building’s classification under the Internal Revenue Code and the nature of its use.
1. Section 179 Expensing
Section 179 allows taxpayers to expense the cost of certain qualifying property in the year it is placed in service, subject to annual limits and other requirements. However, not all buildings or structures qualify.
a. What Qualifies for Section 179?
- Section 179 property generally includes tangible personal property (machinery, equipment, certain vehicles, computers, etc.) and certain qualified real property improvements, but not buildings or their structural components.
- Qualified real property for Section 179 includes:
- Qualified improvement property (QIP) as defined in IRC §168(e)(6)
- Certain improvements to nonresidential real property: roofs, HVAC, fire protection and alarm systems, and security systems, placed in service after the building was first placed in service.
Buildings themselves (including a metal steel building) are generally considered real property and are not eligible for Section 179 expensing. Only certain improvements to nonresidential real property, as described above, may qualify.
- Exceptions: If the metal building is a “single-purpose agricultural or horticultural structure” or a “storage facility (except a building or its structural components) used in connection with the distribution of petroleum or any primary product of petroleum,” it may qualify for Section 179.
b. Section 179 Limits
- For 2025, the maximum Section 179 deduction is $2,500,000, reduced dollar-for-dollar if total qualifying property placed in service exceeds $4,000,000.
2. Bonus Depreciation (Section 168(k))
Bonus depreciation under IRC §168(k) allows for accelerated first-year depreciation of certain qualifying property.
a. What Qualifies for Bonus Depreciation?
- To qualify, property must generally:
- Be new or used MACRS property with a recovery period of 20 years or less,
- Be acquired and placed in service according to the rules in §168(k),
- Not be required to be depreciated under the Alternative Depreciation System (ADS).
Buildings (including metal steel buildings) are generally classified as nonresidential real property (39-year recovery period) or residential rental property (27.5-year recovery period), both of which have recovery periods greater than 20 years. Therefore, a typical metal building used as a warehouse, shop, or similar structure is not eligible for bonus depreciation.
- Exception: Certain components of the building (e.g., HVAC, some electrical, or other tangible personal property identified through a cost segregation study) may have a recovery period of 20 years or less and could qualify for bonus depreciation.
b. Bonus Depreciation Rates
- For property acquired after January 19, 2025, bonus depreciation is restored to 100% for qualified property.
3. Cost Segregation
A cost segregation study can be used to identify and separate components of a building that are tangible personal property or land improvements (e.g., certain electrical, HVAC, specialty flooring, or site improvements) with a recovery period of 20 years or less. These components may be eligible for Section 179 or bonus depreciation, even though the building structure itself is not.
- The building’s structural shell (walls, roof, foundation) is generally 39-year property (nonresidential real property) and not eligible for Section 179 or bonus depreciation.
- Components identified as tangible personal property or land improvements (e.g., certain interior finishes, specialty electrical, or site work) may be eligible for accelerated expensing.
4. Summary Table
5. Conclusion
A taxpayer generally cannot fully expense the cost of a metal steel building itself in the year it is placed in service using Section 179 or bonus depreciation. The building’s structural components are considered nonresidential real property (39-year recovery period) and are not eligible for either provision. However, certain components of the building identified through a cost segregation study (such as land improvements or tangible personal property with a recovery period of 20 years or less) may be eligible for Section 179 expensing or bonus depreciation and could be fully expensed in the year placed in service, subject to applicable limits and requirements.
If you have a specific use or configuration for the metal building (e.g., agricultural, storage for petroleum products, or if it is a componentized structure), or if you are considering a cost segregation study, more details would be needed to provide a precise answer for your situation.
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