Can taxpayers use bonus depreciation or Section 179 for windows, doors, electrical, insulation, grading/concrete, gutters, and gravel/stone?
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To determine whether taxpayers can use bonus depreciation or Section 179 expensing for windows, doors, electrical, insulation, grading/concrete, gutters, and gravel/stone, it is necessary to analyze each asset type under the relevant provisions of the Internal Revenue Code, Treasury Regulations, and IRS guidance. The answer depends on whether the asset is classified as tangible personal property (§ 1245 property) or as a structural component of a building (§ 1250 property), and whether it otherwise meets the requirements for Section 179 or bonus depreciation.
1. Section 179 Expensing
General Rule:Section 179 allows taxpayers to expense the cost of qualifying property in the year it is placed in service, subject to annual limits. Qualifying property generally includes tangible personal property (not real property or structural components of buildings), certain computer software, and certain qualified real property (such as qualified improvement property and specific improvements to nonresidential real property).
Section 179 does NOT apply to:- Land and land improvements (e.g., grading, landscaping, parking lots, sidewalks, roads, fences, etc.), except for certain qualified improvements to nonresidential real property.- Buildings and their structural components (e.g., windows, doors, insulation, gutters, etc.), unless the improvement qualifies as "qualified improvement property" or is specifically listed as eligible under Section 179(e).
Qualified Real Property under Section 179(e):- Qualified improvement property (QIP) as defined in §168(e)(6): improvements to the interior of a nonresidential building, not including enlargements, elevators/escalators, or the internal structural framework.- Roofs, HVAC, fire protection and alarm systems, and security systems placed in service after the building was first placed in service.
Analysis by Asset:
- Windows and Doors:
These are generally considered structural components of a building and are not eligible for Section 179 expensing unless they are part of qualified improvement property (QIP) to a nonresidential building. However, QIP specifically excludes improvements attributable to the enlargement of the building, elevators/escalators, or the internal structural framework, but does not specifically exclude windows and doors. If the windows and doors are part of an interior improvement to a nonresidential building and not excluded, they may qualify as QIP and thus be eligible for Section 179. For residential property, Section 179 does not apply. - Electrical:
The building’s general electrical system (wiring, panels, outlets of general applicability) is a structural component and not eligible for Section 179. However, dedicated electrical connections for specific equipment (e.g., machinery) may be considered tangible personal property and thus eligible. For nonresidential real property, improvements to the electrical system that are part of QIP may be eligible for Section 179. - Insulation:
Insulation installed as part of the building envelope is a structural component and not eligible for Section 179. If insulation is installed as part of an interior improvement to a nonresidential building and meets the definition of QIP, it may be eligible. - Grading/Concrete:
Grading and concrete work related to land improvements (e.g., parking lots, sidewalks, driveways) are land improvements and not eligible for Section 179. Concrete that is part of a building’s structural components (e.g., foundation, floors) is also not eligible. Section 179 does not apply to land improvements except for certain storage facilities for petroleum distribution. - Gutters:
Gutters are considered structural components of a building and are not eligible for Section 179. - Gravel/Stone:
Gravel or stone used for driveways, parking lots, or landscaping is a land improvement and not eligible for Section 179.
2. Bonus Depreciation
General Rule:Bonus depreciation under §168(k) is available for "qualified property," which includes most tangible property with a recovery period of 20 years or less, computer software, water utility property, and certain improvements to nonresidential real property. The property must be new or, for property acquired after September 27, 2017, can be used if it meets certain requirements. Bonus depreciation is not available for property required to be depreciated under the Alternative Depreciation System (ADS), which includes property used predominantly outside the U.S., tax-exempt use property, and certain other categories.
Analysis by Asset:
- Windows and Doors:
As structural components of a building, windows and doors are generally considered part of nonresidential real property (39-year property) and are not eligible for bonus depreciation. However, if they are part of QIP (interior improvements to nonresidential real property, not attributable to enlargement, elevators/escalators, or internal structural framework), they may be eligible for bonus depreciation. QIP has a 15-year recovery period and is eligible for bonus depreciation if placed in service after 2017. - Electrical:
General building electrical systems are structural components and not eligible for bonus depreciation. Dedicated electrical for specific equipment may be eligible if classified as tangible personal property with a recovery period of 20 years or less. Electrical improvements that are part of QIP may be eligible for bonus depreciation. - Insulation:
Insulation as part of the building envelope is a structural component and not eligible for bonus depreciation. If part of QIP, it may be eligible. - Grading/Concrete:
Grading and concrete work for land improvements (e.g., parking lots, sidewalks) are 15-year property and generally eligible for bonus depreciation if not required to be depreciated under ADS. Concrete that is part of the building’s structure (foundation, floors) is not eligible, as it is part of the building (39-year property). - Gutters:
Gutters are structural components and not eligible for bonus depreciation. - Gravel/Stone:
Gravel or stone used for driveways, parking lots, or landscaping is a land improvement (15-year property) and generally eligible for bonus depreciation if not required to be depreciated under ADS.
3. Special Considerations
- Residential vs. Nonresidential Property:
Section 179 and bonus depreciation rules are more restrictive for residential rental property. QIP and certain other improvements are only available for nonresidential real property. - Cost Segregation:
Through a cost segregation study, certain components (e.g., dedicated electrical, specialty concrete pads for equipment) may be classified as tangible personal property and thus eligible for Section 179 or bonus depreciation, but general building components and land improvements are not.
4. Summary Table
6. Conclusion
Taxpayers generally cannot use Section 179 or bonus depreciation for windows, doors, electrical, insulation, grading/concrete, gutters, and gravel/stone if these are structural components of a building or land improvements, except:
- If the asset is part of qualified improvement property (QIP) to a nonresidential building, it may be eligible for Section 179 and bonus depreciation.
- Dedicated electrical for specific equipment (not general building wiring) may be eligible.
- Land improvements such as parking lots, sidewalks, and gravel/stone (15-year property) are eligible for bonus depreciation, but not Section 179.
- General building components (windows, doors, insulation, gutters) and grading/concrete for the building foundation are not eligible for either provision.
Each asset must be analyzed based on its use, location, and whether it meets the definitions of tangible personal property, QIP, or land improvement under the Code and regulations.
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