Building  Owners  and  Managers  Association  International

Building Owners and Managers Association International

Leasehold Depreciation

BOMA Position

Limiting leasehold improvements to be depreciated at a rate of 1/39th per year until the improvement goes “out of service” runs counter both to common sense and the reality of the marketplace. It is a hidden and inequitable tax on the commercial real estate industry. The tax code should be amended to more closely reflect the reality of the marketplace.


Leasehold improvements, also known as tenant improvements, include changes to walls, floors, ceilings, lighting, and plumbing to meet the needs of a new or existing tenant. In the commercial real estate marketplace, with the average lease running from five to ten years, such reconfigurations are commonplace.

In 2004, President Bush signed into law a corporate tax bill that temporarily reduced the depreciation period for leasehold improvements from 39 years – the rate of the building structure itself – to 15 years for improvements put into place before the end of 2005. It was subsequently extended a number of times to include a two year extension as part of the tax “extenders” package that was included in a compromise tax bill between the President Obama and the Republicans passed during the “lame duck” session of the 111th Congress. On December 19, the Protecting Americans from Tax Hikes (PATH) A​ct of 2015 was signed into law and made permanent 15-year depreciation on leasehold impovements.

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