In Florida CRE, depreciation for land improvements is a direct lever to convert necessary site work into after-tax cash flow. By treating exterior scopes—parking, drainage, lighting, fencing, landscaping—as depreciable 15-year property, investors can accelerate deductions, strengthen DSCR, and support better exit pricing in competitive submarkets.
Why this matters in Florida CRE
Florida’s growth in retail pads, last-mile industrial, and mixed-use means large exterior capex—repaving, drainage, LED lighting, irrigation—that you can generally recover over 15 years, and often faster with bonus rules. This is why depreciation for land improvements often moves the needle on NOI and exit pricing. If you’re benchmarking density before upgrades, our analysis on retail space per capita in Tampa can help frame underwriting.
What actually qualifies
Land itself never depreciates. But many “improvements to land” do: parking lots/resurfacing, sidewalks/curbs, exterior lighting, fencing/walls, landscaping/irrigation, on-site drainage, and ground-set signage. When investors ask what truly qualifies, depreciation for land improvements generally covers these exterior items under MACRS as 15-year property, using 150% declining-balance and switching to straight-line when optimal.
Don’t confuse land improvements with QIP
Qualified Improvement Property (QIP) covers interior improvements to nonresidential buildings. It is not the same as exterior site work. Mixing them causes the wrong recovery period/method. Treat exterior work as 15-year land improvements; treat interior QIP under its separate rules—this keeps depreciation for land improvements clean and defensible.
How depreciation works
Under MACRS, depreciation for land improvements typically follows a 15-year recovery period (20 under ADS) with the 150% declining-balance method and a mid-quarter/mid-month convention as applicable. You claim it on Form 4562; technical guidance appears in IRS Publication 946, which also outlines ADS elections and placed-in-service mechanics.
Bonus depreciation in 2025
If placed-in-service timing aligns, depreciation for land improvements may qualify for immediate expensing under current 2025 bonus rules, subject to eligibility and elections. Because most land improvements are 15-year MACRS property, properly documented site work placed in service in 2025 can unlock substantial first-year deductions. Coordinate timing, acquisition vs. self-construction rules, and elections with your CPA.
Where cost segregation adds real value
Engineering-driven cost segregation breaks a project into 5/7/15-year components and validates the portion of capex that belongs to land improvements. A defensible study clarifies which site-work elements fall under depreciation for land improvements and supports accelerated deductions with drawings, takeoffs, photos, and GL reconciliations.
Illustrative model
Assume a Tampa retail pad books $600,000 of paving, lighting, and landscaping placed in service in March 2025. Under standard MACRS you’d recover this over 15 years using 150% DB. In a bonus-eligible year, those same amounts are candidates for depreciation for land improvements expensed up front—subject to rules—dramatically improving after-tax cash flow and shortening payback.
Common mistakes
A frequent error is booking land (non-depreciable) and exterior work together, which dilutes the basis eligible for depreciation for land improvements. Others include misclassifying QIP vs. site work, ignoring “small” exterior items (irrigation, bollards, drainage structures), and missing the 2025 window due to weak placed-in-service documentation.
Strategic context for Florida investors
Coordinating capex phasing with leasing and marketing amplifies the impact of depreciation for land improvements on year-one returns. When you’re timing upgrades against exposure, explore current retail space for lease dynamics so your site-work schedule supports absorption and rent goals in each submarket.
Conclusion & next step
Used correctly, depreciation for land improvements can transform the economics of acquisitions, redevelopments, and ground-up projects across Florida. Share property details, timing, and budget; we’ll map MACRS lives, 2025 bonus eligibility, and a cost-seg plan you can take to partners.
