Office Building Cost Segregation: Tenant Work, Parking and QIP
By AE Tax Advisors · Published 2026-08-10 · Updated November 8, 2026.
An office study should distinguish acquired building components from later tenant improvements and equipment. The tax result depends on the actual property and who made and owns each improvement.
Trace tenant and owner costs
Review leases, improvement allowances, invoices and prior schedules. Determine which taxpayer owns and depreciates each asset. A purchased building's existing interior is not automatically QIP made by the buyer.
Review equipment and building systems
Network hardware, cabling, access systems and dedicated utilities need supported classifications. Flooring, millwork and partitions also depend on function and installation. Being removable or described as low-voltage does not alone settle every asset's recovery period.
Apply QIP requirements to later improvements
Test whether the taxpayer made a qualifying interior improvement after the nonresidential building was first placed in service. Enlargements, elevators or escalators and the internal structural framework are excluded. Bonus eligibility is a separate review of dates and applicable rules.
Distinguish paving from parking buildings
Surface parking improvements and a structural parking garage are not interchangeable. A freestanding garage is not automatically a 15-year land improvement. Review the structure and separately identifiable equipment using the applicable asset classifications.
Model vacancy, loss limits and corrections
Vacancy and other income can affect the value of accelerated deductions. Basis, at-risk and passive rules still matter. If prior depreciation was wrong, choose the proper correction method; a later study does not guarantee a particular deduction year or an automatic Form 3115 result.
Book a Cost Seg Discovery Call with leases, construction records, current occupancy and existing depreciation schedules.
Frequently Asked Questions
Is a freestanding parking garage automatically 15-year property?
No. Its structural classification differs from surface paving and must be reviewed.
Does buying an office with completed interiors make those costs QIP?
Not automatically. The taxpayer-made improvement requirement and other conditions matter.
Sources and review notes
Reviewed November 8, 2026 by AE Tax Advisors. Examples are illustrative; apply the rules to the relevant tax year and records. See our editorial policy.