Restaurants & QSR
Your kitchen is not a 39-year asset. Most of it never was.
A restaurant building carries a wall of equipment: the line, the hoods, the walk-ins, the drive-thru. The IRS default writes the whole building off over 39 years. A study finds the parts that should not have to wait that long.
The baseline
39 years for the building. Much less for what runs it.
A restaurant is nonresidential property, so the IRS default is 39 years. But look at what actually fills the space: the fryers and ranges, the walk-in coolers, the hood system above the line, and the canopy over the drive-thru lane. Cost segregation sorts that out from the shell, so the parts that wear out fast get deducted fast.
What reclassifies
Where the short-life parts hide in a restaurant.
The kitchen line
Fryers, ranges, walk-in coolers, prep tables, and point-of-sale gear. This is classic short-life personal property, and a restaurant kitchen has a full set of it.
Hoods, vents, and hookups
The gas lines, plumbing, and electrical conduits that exist to serve a specific piece of kitchen equipment can move to a short life too, even while the wall behind them stays with the building.
Dining room finishes
Decorative lighting and finish work get a real look, not an automatic short life. Some fixtures qualify. Others are built in and stay with the building.
Drive-thru and the site
A drive-thru canopy, the paving customers line up on, and site lighting are the kind of site work that can carry a 15-year life instead of 39.
The hookups rule comes straight from the case law. InDuaine v. Commissioner, a restaurant case, the plumbing, gas lines, and electrical conduits serving specific kitchen equipment qualified as personal property, while the slab and the wall tile stayed with the building. InMorrison, Inc. v. Commissioner, an appeals court approved splitting a dual-use system between the share serving the kitchen equipment and the share serving the building.
The honest part
Decor gets a real look, not a blanket short life.
InShoney's South, Inc. v. Commissioner, chandeliers and hanging lanterns qualified as short-life property. But the IRS later put its disagreement on record for that decorative lighting call, so a lighting claim needs real facts behind it, not a template.
InBoddie-Noell Enterprises v. United States, a restaurant study lost ground for a different reason: parts the regulations already list as building components stayed real property, and the court was blunt that a study has to be well documented, not built on guesses. We would rather show you a study with the proof attached than promise a number over the phone.See what makes a study audit-defensible.
- What a restaurant study documents:
- Kitchen equipment tied to its own utility runs
- Decor and finishes classified item by item
- Drive-thru and site work at its 15-year class
- Photos and records behind every line
The matrix advantage
The IRS wrote a classification matrix for restaurants.
The IRS's own audit guide,Publication 5653, includes classification matrices for only a handful of industries, and restaurants are one of them. When a study's classifications match the IRS's published matrix for your property type, the guide tells its own examiners not to make adjustments to those calls. That is a real advantage, and it is one more reason a restaurant study should be built to the guide, not around it.
Renovating a leased space? Interior buildout work can also qualify asqualified improvement property, a 15-year life instead of 39, with the option for 100% bonus depreciation.
Your kitchen already paid for these deductions.
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