Land Improvements: 15-Year Depreciation for Driveways, Fences and More

By Tom, CPA · Updated October 27, 2026

Part of: Rental Property Taxes

TL;DR: Land itself is never depreciable, but improvements to land such as paved driveways, parking lots, sidewalks, fences, and some landscaping are 15-year property using the 150% declining balance method. They are eligible for bonus depreciation, which is 100% for qualified property acquired after January 19, 2025, as of October 2026.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Your tenant pays the mortgage; the IRS pays for the roof, eventually, over 27.5 years. The driveway, though, gets a much better deal: 15 years, and potentially all at once. Land improvements are the middle child of real estate depreciation, overlooked between the building and the land, and they quietly hold some of the best acceleration opportunities available to ordinary landlords.

This guide covers what counts, how bonus depreciation applies, how cost segregation uses land improvements, and the mistakes that trip people up. Rules as of October 2026.

CPA Warning Label: Not everything outside the house is a land improvement. Grading and clearing land are usually part of the land and never depreciated.

What counts

IRS Publication 946 describes 15-year property as including certain depreciable improvements made directly to land or added to it, such as shrubbery, fences, roads, sidewalks and bridges. Common examples on rental property:

• Paved driveways and parking lots, including striping and curbs.
• Sidewalks, walkways and patios not part of the building.
• Fences and gates.
• Retaining walls.
• Landscaping that will wear out or be replaced, such as shrubs and trees planted near a building whose replacement would be required if the building were replaced.
• Outdoor lighting for parking and walkways.
• Swimming pools and outdoor recreational areas at rental communities (often treated as land improvements).
• Exterior drainage, culverts and certain site utilities, depending on facts.

What does not count: the land itself; general land grading, clearing, and excavation that permanently improves land (usually added to land basis); landscaping that is not closely associated with a depreciable asset; and components of the building, like a foundation or an attached porch, which are part of the 27.5- or 39-year structure.

How depreciation works

Land improvements are 15-year MACRS property. The general depreciation system uses the 150% declining balance method switching to straight-line, with the half-year convention unless the mid-quarter convention applies because more than 40% of the year's depreciable personal property and 15-year property was placed in service in the last quarter (Publication 946). Under the 150% declining balance table, the first year is 5.00% of basis with the half-year convention.

Compared with 27.5-year straight-line (about 3.6% per year), even without bonus a land improvement is deducted faster.

Bonus eligibility

Bonus depreciation applies to MACRS property with a recovery period of 20 years or less, so 15-year land improvements qualify. Under P.L. 119-21, bonus is 100% for qualified property acquired after January 19, 2025, and the 100% rate is permanent (IRS Notice 2026-11 and Form 4562 instructions). For the first tax year ending after January 19, 2025, taxpayers could elect 40% instead. Used property can qualify if it was not previously used by the taxpayer and meets the acquisition rules.

Bonus is the default; you elect out by class of property per year if you prefer straight-line. Electing out of 15-year bonus applies to all 15-year property placed in service that year.

State tax: several states do not conform to federal bonus depreciation, requiring an addback and separate state schedule. Check your state revenue department.

Cost seg overlap

Cost segregation studies commonly identify land improvements as one of their biggest categories, especially for properties with large parking areas, extensive paving, fences or site lighting: apartment complexes, strip centers, self-storage facilities and mobile home parks. On a single-family rental, land improvements may be just a driveway, a fence and some landscaping, which a careful owner can often identify without a full study, using contractor invoices or reasonable cost estimates for newly built items.

For purchased property, the challenge is allocation: the purchase price lumps land, building and land improvements together. A study or appraisal supports breaking out the land improvements. Pulling a number out of thin air is not support, and examiners know the usual round numbers people pull.

Examples

Illustration 1, new driveway: In 2026 a landlord replaces a gravel driveway with a $14,000 concrete driveway at a long-term rental. It is a land improvement acquired after January 19, 2025. With 100% bonus, the landlord can deduct $14,000 in 2026 (subject to the passive loss rules). If the landlord elects out of bonus, the first-year deduction is 5% of $14,000, or $700, using the 150% declining balance table and the half-year convention. The old gravel drive's remaining basis, if any was separately tracked, may be written off as a disposition.

Illustration 2, purchased property: A buyer acquires a fourplex for $800,000. The appraisal allocates $160,000 to land. A cost study identifies $40,000 of land improvements (parking pad, fencing, walkways, landscaping) and $30,000 of 5-year property. Building basis: $570,000.

Without bonus, 5-year property under the 200% declining balance half-year table is 20% in year one. Building year-one under mid-month for July is 5.5 months out of 12, divided by 27.5. Figures rounded.

Mistakes

• Lumping land improvements into land. This forfeits depreciation entirely. A paved parking lot is not "land."
• Lumping them into the building. Less costly, but you depreciate over 27.5 or 39 years instead of 15 and miss bonus.
• Expensing a new driveway as a repair. Replacing a driveway is generally a restoration or improvement under the tangible property regulations, not a repair. Patching potholes and resealing are typically repairs.
• Forgetting recapture. Bonus depreciation on land improvements creates additional depreciation beyond straight-line, which can be recaptured as ordinary income on a taxable sale under the Section 1250 rules (IRS Topic 409 and Publication 544).
• Ignoring the mid-quarter convention. If more than 40% of the year's non-real property additions land in the fourth quarter, the mid-quarter convention changes first-year depreciation when bonus is not used.
• Skipping the disposition. When you replace a fence or driveway, the old asset's remaining basis can often be deducted through a partial disposition election or a disposition of a separately depreciated asset.

Land improvements and the repair safe harbors

Not every outdoor project needs a depreciation schedule. The tangible property regulations offer three ways small outdoor work can be deducted immediately, apart from bonus:

• Repairs. Resealing a driveway, patching a fence, or replacing a few dead shrubs generally keeps the property in ordinary operating condition and is deductible.
• De minimis safe harbor. With the annual election, items or invoices up to $2,500 can be expensed, such as a short section of new fencing billed separately.
• Small taxpayer safe harbor. For buildings with unadjusted basis of $1 million or less, total annual repairs and improvements up to the lesser of $10,000 or 2% of the building's unadjusted basis can be expensed with an election. The safe harbor is applied building by building, and if total spending for the year exceeds the limit, none of it qualifies under this safe harbor (IRS tangible property regulations).

When bonus depreciation is 100%, the practical difference between "expense now" and "bonus now" is small for federal purposes, but it can matter for states that do not follow bonus, for recapture character, and for the passive loss computation. Repairs are never recaptured; bonus-depreciated land improvements can be.

Records that support the number

Keep contractor invoices that describe the work (not just "outdoor work, $14,000"), photos before and after, and the date the improvement was finished and ready for use. For purchased property, keep the appraisal or cost study that supports the allocation. These records are what turn a 15-year classification from a guess into a position you can defend, and they also document the basis you will need at sale.