Land itself never depreciates, but almost everything you build on top of it outside the building does. Land improvements are the depreciable structures and site work added to land, classified under asset class 00.3 of Rev. Proc. 87-56 and carried into the MACRS tables of IRS Pub 946 with a 15-year recovery period, 150 percent declining balance under the general depreciation system. Because 15 years is inside the 20-year ceiling in IRC section 168(k), land improvements are fully bonus-eligible, 100 percent for property acquired after January 19, 2025 under OBBBA.
The concrete list
Common 15-year land improvements on rental and commercial property include:
- Parking lots, driveways, and drive aisles, asphalt or concrete
- Sidewalks, curbs, and exterior stairs not attached to the building
- Fencing, gates, and gate operators
- Exterior pole and landscape lighting
- Landscaping, shrubbery, and trees located next to the building
- Retaining walls, storm drainage, and catch basins
- Swimming pools, patios, playgrounds, sport courts, and dumpster enclosures
- Monument sign bases and flagpoles
The line against nondepreciable land
The IRS Cost Segregation Audit Techniques Guide draws the boundary at permanence and association with the land. Initial clearing, rough grading, and general site preparation are treated as part of the land's cost, never depreciable, because they are inextricably associated with the land itself. Landscaping is depreciable when it sits immediately adjacent to the building and would be destroyed if the building were replaced; perimeter plantings that would survive a rebuild lean toward land cost. Utility connections can go either way depending on ownership and function, which is why studies document each site element rather than lumping them.
A worked example
An investor closes on a $750,000 single-family rental with a pool in February 2026, allocating $150,000 to land and $600,000 to depreciable basis. A cost segregation screen identifies $86,000 of land improvements: $30,000 driveway and parking pad, $24,000 pool and deck, $14,000 fencing, $10,000 landscaping beside the house, and $8,000 exterior lighting and drainage. Acquired after January 19, 2025, that $86,000 is deductible in full in year 1 under 100 percent bonus, versus roughly $3,127 if it had stayed buried in the 27.5-year building basis. The remaining structure depreciates normally, and any 5-year personal property found inside stacks on top.
Caveats worth knowing
Property acquired on or before January 19, 2025 keeps the bonus phase-down, 40 percent for 2025 placements, so acquisition date matters more than placement date for the rate. Electing out of bonus leaves land improvements on the 15-year 150 percent declining balance schedule, still far faster than the building. And land improvements are section 1250 property, so depreciation beyond straight line can come back as ordinary recapture at sale; model the exit, not just year 1. Amadae's cost segregation screen itemizes the land improvement share of a specific property as a screening estimate, and the free Tax Strategy Projector shows how the first-year deduction lands against your actual income.