Land improvements: 15-year MACRS property
Under MACRS, land improvements are classified as 15-year property and depreciate using the 150% declining balance method. Common rental-property land improvements include swimming pools, in-ground hot tubs, fences, driveways, parking lots, sidewalks, patios, retaining walls, exterior lighting, irrigation systems, and decorative landscaping. The building itself — walls, roof, floors, plumbing, HVAC — is 27.5-year property.
The difference matters. A $30,000 pool depreciated over 15 years produces a larger annual deduction than the same amount spread over 27.5 years. With a half-year convention in the first year, your year-one deduction under the 150% declining balance method is $30,000 × (1/15) × 150% × 50% = $1,500 — then declining each year. (Bonus depreciation can dramatically accelerate this.)
Bonus depreciation on land improvements
Land improvements placed in service after September 27, 2017 are eligible for bonus depreciation. Under current law, the bonus percentage was 100% through 2022, declining 20% per year thereafter: 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026. Check for any legislative changes, as Congress has extended or modified bonus depreciation before.
If you elect bonus depreciation on a pool installed in 2025, you could deduct 40% of its cost immediately and depreciate the remaining 60% over 15 years — a significant first-year deduction compared to straight 27.5-year treatment.
What is not a land improvement
Items physically attached to and structurally integral to the building — a built-in deck attached to the structure, an attached garage, HVAC equipment serving the building — are generally treated as part of the building at its recovery period. The test is whether the item is a structural component of the building or a separate improvement to the land around it. A detached carport, a freestanding fence, or a standalone parking pad all qualify as 15-year land improvements.
Frequently asked questions
Is a pool at a rental property 15-year or 27.5-year property?
A swimming pool is a 15-year land improvement under MACRS, not 27.5-year real property. It qualifies for bonus depreciation if eligible.
What depreciation method applies to 15-year land improvements?
150% declining balance, with a half-year convention in the first year (unless the mid-quarter convention applies).
Can a fence or driveway be expensed under Section 179?
Section 179 generally does not apply to property used in a rental real estate activity. Bonus depreciation is the primary acceleration method for rental land improvements.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.