What Is 15-Year Property in Cost Segregation?

When people hear about 15-year property in a cost segregation study, it usually raises the question, “How is this different from the building itself?” The short answer is that 15-year property includes certain site and exterior improvements that wear out faster than the building but last longer than interior equipment. These assets qualify for accelerated depreciation compared to standard real property.

15-year property typically relates to improvements made outside the building or directly tied to how the site functions. These assets support access, drainage, and use of the property, but they are not part of the building’s core structure. Because of their nature and useful life, the IRS allows them to be depreciated over a shorter period when properly identified.

Examples of 15-year property often include items such as parking lots, sidewalks, curbing, fencing, site lighting, and certain landscaping features. These are improvements that experience regular wear and exposure to the elements, which is why they do not follow the same depreciation timeline as the building itself.

Why does this matter to property owners? Reclassifying eligible site improvements into 15-year property accelerates depreciation and increases deductions earlier in the ownership period. This improves near-term cash flow without changing how the property is operated or used. For many properties, exterior improvements represent a meaningful portion of total project costs that are often overlooked.

The IRS Cost Segregation Audit Technique Guide explains that land improvements must be clearly identified and supported by documentation to qualify for shorter recovery periods. Proper classification depends on how the asset functions, where it is located, and whether it serves the building or the land independently. Clear documentation helps support the depreciation position if questions arise later.

In simple terms, 15-year property helps bridge the gap between long-life buildings and short-life equipment. When identified correctly in a cost segregation study, it allows property owners to recover costs faster while staying aligned with IRS guidance.

Key Takeaways

• 15-year property includes qualifying site and exterior improvements
• These assets depreciate faster than standard building components
• Common examples include paving, sidewalks, and site lighting
• Accelerated depreciation improves near-term cash flow
• Proper documentation supports IRS compliance