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Updated for 2012
Leasehold improvements are depreciated under MACRS real estate rates.
An addition or improvement you make to depreciable property is treated as separate depreciable property.
Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service.
The recovery period begins on the later of the following dates:
If the improvement you make is qualified leasehold improvement property or qualified restaurant property, the GDS recovery period is 15 years (39 years under ADS).
After October 22, 2004:
Qualified improvements placed in service after October 22, 2004 must be depreciated using the straight-line method over a 15-year recovery period.
Qualified improvement are improvements to an interior portion of a nonresidential building, provided:
After May 12, 1993: Depreciate an addition or improvement to nonresidential real property placed in service after May 12, 1993 over 39 years using straight-line depreciation (MACRS real estate rates).
Start depreciation in the month the addition or improvement is placed in service.
Depreciation: How to Compute Depreciation