The short answer
Land improvements are depreciable improvements made directly to land or added to it, such as paved parking, roads, sidewalks, fences and shrubbery, and under MACRS they are 15-year property recovered with the 150% declining balance method. Because their recovery period is 20 years or less, they qualify for 100% bonus depreciation when acquired after January 19, 2025. The catch comes on sale: depreciation beyond straight-line on these assets is generally recaptured as ordinary income.
At a glance
| Recovery period | 15 years under GDS, 20 years under ADS, asset class 00.3 |
|---|---|
| Method | 150% declining balance, switching to straight-line |
| Bonus | Eligible, 100% for property acquired after January 19, 2025 |
| Recapture | Excess over straight-line taxed as ordinary income under section 1250 |
The 15-year class comes from asset class 00.3 in the IRS class-life tables, applied through section 168
IRS Publication 946 lists 15-year property as including certain improvements made directly to land or added to it, such as shrubbery, fences, roads, sidewalks and bridges, and its Table B-1 places land improvements in asset class 00.3 with a 20-year class life, a 15-year GDS period and a 20-year ADS period. Publication 946 also says Table B-2 controls where an activity class specifically includes land improvements.
Section 168(b)(2) applies the 150% declining balance method to 15-year property, switching to straight-line when that gives a larger deduction. Bare land is never depreciable, and Publication 946 says clearing, grading and general landscaping are usually part of land's cost unless closely tied to a depreciable building.
Publication 946 also notes that land and land improvements do not qualify for the section 179 deduction, so bonus depreciation under section 168(k) is the route to an immediate write-off.
Worked example: bonus on a parking lot, then a sale five years later
Hypothetical: you acquire an office building in 2026 and a cost segregation study assigns $100,000 to the parking lot. Taking 100% bonus depreciation, you deduct the full $100,000 in year one.
Under Reg. section 1.168(k)-1(f)(3), bonus depreciation is not a straight-line method for section 1250 purposes. If straight-line over 15 years would have allowed about $30,000 by the sale, the other $70,000 is additional depreciation. If $60,000 of the sale price is allocated to the lot, its whole $60,000 gain is ordinary income, the lesser of the gain and the additional depreciation. Run your own numbers with your CPA.
Where it bites: sale versus exchange, and the classification of the asset
IRS Publication 544 explains that gain on section 1250 property is ordinary income to the extent of additional depreciation, and the applicable percentage is 100% for current periods. Most site improvements are section 1250 property, but real property other than a building used as an integral part of manufacturing or similar activities can be section 1245 property, where all depreciation is recaptured.
An exchange can defer this. Paved parking areas, roads, fences and in-ground pools are listed as inherently permanent structures in Reg. section 1.1031(a)-3, so they are real property for section 1031 even though they depreciate over 15 years. Section 1250(d)(4) then caps recapture in a like-kind exchange, generally at the gain recognized, provided enough section 1250 property is acquired. See whether a 1031 defers recapture and depreciation on land improvements.
Before you sell, a cost segregation review shows how much of the price lands in this class.
Related questions
Can I take section 179 on paving or fencing?
No. Publication 946 says land and land improvements, including paved parking areas and fences, do not qualify as section 179 property. Bonus depreciation is available instead.
Do land improvements count as real property in a 1031 exchange?
Yes, when permanently affixed. Reg. section 1.1031(a)-3 lists paved parking areas, roads, fences and in-ground swimming pools as inherently permanent structures.
Can I elect out of bonus to avoid ordinary recapture?
Yes, by class of property for the year under section 168(k). The 150% declining balance method still exceeds straight-line in early years, so some recapture can remain. See MACRS for the class rules.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.