What qualifies as a land improvement
The IRS classifies certain improvements to land (not to the building itself) as 15-year property under MACRS. Common examples: driveways and parking lots, fences, sidewalks, landscaping (trees, grading, sod), retaining walls, swimming pools, and outdoor lighting systems. These are separate from the building's 27.5-year (residential) or 39-year (commercial) recovery period and should not be lumped into the building's basis.
The 15-year depreciation schedule
15-year property uses the 150% declining balance method (or straight-line if elected) with a half-year convention. More importantly, 15-year MACRS property qualifies for bonus depreciation, meaning you can deduct a large portion — or all, in prior high-bonus years — in the year the improvement is placed in service. Check the current bonus depreciation phase-down rate in our dedicated guide, as it changes each year.
Identifying and documenting them
A cost segregation study explicitly separates land improvements from the building and from personal property, giving you the most defensible allocation. Without a study, you can self-allocate if you have supporting documentation — itemized contractor invoices showing exterior vs. interior work. The IRS requires a 'reasonable method'; invoices and site plans provide the audit support.
Frequently asked questions
What depreciation period applies to a driveway or parking lot?
15-year MACRS property, eligible for bonus depreciation.
Can I deduct landscaping in year one?
If it is a capital improvement (not routine maintenance), it is 15-year property eligible for bonus depreciation in the year placed in service. Routine lawn care is an operating expense deducted currently.
Sources
- IRS Publication 946 — How to Depreciate Property
- IRS — Cost Segregation Audit Techniques Guide
- IRS Publication 527 — Residential Rental Property
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.