Introduction for QIP (Qualified Improvement Property)
Qualified Improvement Property refers to the process of renovating the interior of an establishment through which cash and benefits can be availed by the taxpayer. Changes under QIP include non-structural and interior improvements or renovations, however with some exceptions. Qualified Improvement Property often also acts as an effective legal tax deduction.
Understanding QIP
Qualified Improvement Property is a classification of taxable assets payable by the taxpayer in cases when the owner makes improvements to their establishment. QIP specifically excludes the expenses made on changes made to the existing, non-residential and real property buildings that are: enlargement of the building, any elevator or escalator, the internal structural framework of the building.
In recent years, changes made to QIP under the CARES Act have enabled cash flow opportunities by facilitating deductions via depreciation bonus due to an increased recovery period. In essence, Qualified Improvement Property is the property with changes to its interior that the Act’s revisions might allow for benefits to the taxpayer.
Factors to Consider
QIP is only applicable for improvements made on non-residential buildings used for businesses.
The buildings must have been in service for years by the time any taxpayer seeks to improve the building.
Qualified Improvement Property is applicable for more than just retail businesses; including banks, malls, hospitals, hotels, offices, etc.
If another taxpayer buys the building from the existing owner, the new owner will not become qualified to avail the benefits of Qualified Improvement Property, since they were made by the prior taxpayer.
QIP brings many tax savings and cash flow benefits. Under the new QIP, taxpayers can take advantage of the increase in recovery period and claim the bonus depreciation for QIP.
Qualified Improvement Property is only applicable when the current taxpayer only has made improvements to the building.
QIP has been confused with other names, though the recent revision to the act erases any confusion to the same and removes the other asset categories, leaving on QIP eligibility.
