QSR Bonus Depreciation: A Net Lease Buyer’s Guide
A restaurant building, its site improvements, and its operating equipment do not share one depreciation life. For a net lease buyer, the useful question is not “Does this QSR qualify?” but “Which acquired assets may qualify, who owns them, and what facts support the treatment?”
QSR bonus depreciation is an asset-level analysis, not a percentage applied automatically to the purchase price. Land is not depreciable, and the ordinary structural building basis generally remains 39-year nonresidential real property. The potential acceleration usually sits in qualifying shorter-life property supported by the buyer’s basis allocation, ownership facts, acquisition date, and placed-in-service evidence.
That distinction matters in single-tenant restaurant transactions because the real estate can include paving, site lighting, drive-thru improvements, signage, kitchen systems, furniture, point-of-sale equipment, and tenant-installed property. A lease label does not determine federal tax classification or ownership.
QSR bonus depreciation begins with three ownership layers
Land and shell
Allocate land separately. The ordinary structural building portion generally does not become bonus-eligible merely because the property changed hands.
Landlord-owned components
Identify site work, specialized systems, signs, fixtures, and equipment actually included in the buyer’s acquisition and depreciable basis.
Tenant-owned property
Confirm whether kitchen equipment, furniture, digital boards, and other trade fixtures belong to the tenant. A buyer generally cannot depreciate property it did not acquire or own.
The closing statement, purchase agreement, lease, exhibits, construction records, equipment schedules, tenant estoppels, and property-condition materials should tell one consistent story. If they do not, resolve the inconsistency before modeling QSR bonus depreciation.
An asset map for QSR acquisition diligence
This is a diligence map, not a classification table. Similar-looking assets can receive different treatment based on function, ownership, use, and supporting records. A defensible cost segregation analysis may help identify and allocate shorter-life components, but it cannot create ownership or basis. QSR bonus depreciation modeling should follow that documented asset map.
What current federal guidance changes—and what it does not
IRS Notice 2026-11 in Internal Revenue Bulletin 2026-06 provides interim guidance for property acquired after January 19, 2025 and directs taxpayers to apply rules consistent with the existing section 168(k) regulations, with specified date substitutions and modifications. The guidance applies a 100% percentage to certain qualified property acquired after that date.
IRS Publication 946 for 2025 returns explains that qualifying property generally includes tangible MACRS property with a recovery period of 20 years or less and that certain used property can qualify. That does not mean an existing QSR building is entirely eligible. Asset type, prior use, related-party restrictions, basis rules, elections, and placed-in-service facts still matter.
For acquisitions, also review Stonecliff’s used-property acquisition framework. For improvements or a transition between tenants, document when each asset was ready and available for its intended use using the placed-in-service diligence framework.
Lease provisions that can change the QSR analysis
Ownership and removal rights
A lease may require the tenant to install equipment while retaining title and removal rights. Another lease may transfer certain improvements to the landlord when installed or at lease expiration. Those provisions should be reviewed alongside state property law, transaction documents, and the actual facts.
Repair, replacement, and casualty duties
Who must replace a failed HVAC unit, pylon sign, grease system, or drive-thru component? Expense responsibility does not necessarily answer tax ownership, but it helps identify facts the buyer and advisers should reconcile.
Rebranding and remodel obligations
Franchise refresh cycles can create future capital requirements and asset dispositions. Model the existing acquisition separately from later landlord-funded or tenant-funded work; do not assume every future expenditure shares the acquisition’s treatment.
Five underwriting mistakes to avoid
- Applying a deduction percentage to the gross price. Begin with land and asset-level basis allocation.
- Counting tenant property. Verify title, bill-of-sale coverage, and removal rights.
- Using a generic property-type percentage. Site layout, construction, lease structure, and documentation vary materially.
- Confusing eligibility with usability. Passive-loss, at-risk, business-use, entity, state, and other rules may limit or defer the result.
- Ignoring exit consequences. Accelerated deductions can affect adjusted basis and potential depreciation recapture.
Buyer-to-adviser checklist
- What exactly is included in the real-estate acquisition and the buyer’s depreciable basis?
- Which restaurant components are tenant-owned, removable, financed, or subject to another party’s interest?
- What supports the allocation among land, building, land improvements, equipment, and other components?
- Does the transaction satisfy the acquisition and used-property requirements?
- When was each asset placed in service by this taxpayer?
- Do federal elections, state conformity, passive-loss, at-risk, or entity rules change the modeled result?
- How do depreciation and recapture assumptions affect the projected hold and disposition?
The brokerage role
Stonecliff is a commercial real estate brokerage. We help buyers evaluate QSR real estate, lease economics, tenant credit, location, transaction structure, and the documents their independent advisers need. See the broader net lease bonus depreciation guide, then ask qualified tax and legal advisers to evaluate the investor’s specific facts.
Important tax and legal disclosure
Stonecliff is a commercial real estate brokerage and does not provide tax, legal, accounting, engineering, appraisal, or cost-segregation advice. This article is general educational information, is not taxpayer-specific advice, and does not promise any tax result. Facts and federal and state laws vary and can change. Before acquiring, improving, leasing, exchanging, selling, filing a return, or claiming a deduction, readers should verify asset ownership and eligibility, basis allocation, calculations, acquisition and placed-in-service timing, prior use, related-party status, state conformity, passive-loss and at-risk treatment, depreciation recapture, elections, documentation, and transaction consequences with their own qualified tax and legal advisers.
Primary sources reviewed: IRS Internal Revenue Bulletin 2026-06; IRS Publication 946 (2025); and IRS Instructions for Form 4562.
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