Parking Facilities

Written by Steven D. Beaucaire, MST
Vice President, Tax - Bedford Capital Consulting

We all know the expression: "the devil is in the details". Well, knowing how to differentiate between a "parking structure" and a "parking garage" can parley into a considerable tax benefit for an individual or a corporation - if you know the details.

Let's examine the advantage of knowing the difference. A parking garage is usually classified as a building and is therefore depreciated over a 27.5-yr or 39-yr life. Normally, a freestanding parking garage would meet the criteria of a building - as defined by the IRS - if its construction is permanently attached to the building it serves, looks like or in fact could function as a building and it has features such as lighting and fire suppression systems, full-height walls, or a roof. A parking structure, however, can take on many different configurations. If the parking structure has certain unique features such as slanted floors, no roof, half walls, etc., it is possible that it can be depreciated over a 15-year life - as a land improvement. There are other important aspects to consider, such as initial structural design criteria, so it behooves the property owner and their tax professional to take a closer look.

Bottom Line: it depends on the details of the structure to determine whether it is considered a land improvement or a building. While this issue has been challenged in the past, the Tax Court has upheld the taxpayer's position when the applicable conditions were not only met, but most importantly, were thoroughly documented. Best advice is to have an engineering analysis done that includes a site visit and photo documentation to support the classification of the structure. These are some of the details that make all the difference.