Can the recovery period for cabinets be accelerated under Section 179 or bonus depreciation?
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To determine whether the recovery period for cabinets can be accelerated under Section 179 or bonus depreciation, we must analyze:
- How cabinets are classified for depreciation purposes (i.e., as § 1245 or § 1250 property),
- Whether they are eligible for Section 179 expensing or bonus depreciation,
- The applicable recovery period, and
- Any industry-specific guidance or exceptions.
1. Classification of Cabinets
General Rule:Cabinets are typically considered part of the building if they are permanently affixed and serve the operation or maintenance of the building (i.e., they are structural components), making them § 1250 property. However, if cabinets are not permanently affixed, are readily removable, or serve a business function unrelated to the building’s operation (e.g., display cabinets, retail counters), they may be classified as tangible personal property (§ 1245 property).
Industry Directives:- Retail, Restaurant, Auto Dealership, and Residential Rental Property Directives provide that: - Cabinets and counters used for general building operation (e.g., restroom, breakroom, kitchen cabinetry in apartments) are § 1250 property (depreciated as part of the building: 39 years for nonresidential, 27.5 years for residential rental). - Cabinets and counters related to retail activity, customer service, or display (e.g., retail counters, display cabinets, customer reception counters) are § 1245 property (5-year property under asset class 57.0 Distributive Trades and Services).
Key Determinants:- Permanence of installation,- Function (building operation vs. business activity),- Readily removable or not.
2. Section 179 Expensing
Eligibility:- Section 179 applies to tangible personal property (§ 1245 property) used in the active conduct of a trade or business.- Structural components of a building (§ 1250 property) are not eligible for Section 179.- Cabinets classified as § 1245 property (e.g., display cabinets, retail counters, customer service counters) are eligible for Section 179, subject to the annual dollar and business income limits.
Limits for 2025:- Maximum Section 179 deduction: $2,500,000- Phase-out threshold: $4,000,000
3. Bonus Depreciation
Eligibility:- Bonus depreciation applies to property with a recovery period of 20 years or less under MACRS, including most tangible personal property (§ 1245 property).- For 2025, bonus depreciation is 100% for property acquired and placed in service after January 19, 2025; otherwise, the phase-down rates apply.- Cabinets classified as § 1245 property (e.g., display cabinets, retail counters) are eligible for bonus depreciation.- Cabinets that are structural components (§ 1250 property) are not eligible for bonus depreciation.
4. Recovery Period
- § 1245 property (tangible personal property): 5 years (asset class 57.0 Distributive Trades and Services).
- § 1250 property (structural components): 39 years (nonresidential real property) or 27.5 years (residential rental property).
5. Cost Segregation and Documentation
- If cabinets are part of a new or acquired building, a cost segregation study may be used to identify and substantiate which cabinets qualify as § 1245 property and are thus eligible for accelerated recovery.
- The study must be well-documented, with clear rationale and support for the classification.
6. Summary Table
7. Conclusion
Cabinets can be eligible for accelerated recovery under Section 179 or bonus depreciation if, and only if, they are classified as tangible personal property (§ 1245 property)—that is, if they are not structural components of the building, are not permanently affixed, and are used in the business activity (e.g., display cabinets, retail counters, customer service counters). In such cases, they are 5-year property and eligible for both Section 179 expensing (subject to limits) and bonus depreciation. Cabinets that are structural components of the building (e.g., kitchen or restroom cabinetry permanently affixed and serving the building’s operation) are § 1250 property, depreciated over 39 or 27.5 years, and are not eligible for Section 179 or bonus depreciation.
If you have a specific scenario (e.g., type of business, use and installation of the cabinets), more detail can be provided on the likely classification and eligibility for accelerated recovery. Proper documentation and, if necessary, a cost segregation study are essential to support the classification and deduction.
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