Restaurants and Fast-Food Properties
Restaurant buildings are generally 39-year nonresidential real property. The IRS restaurant matrix is one of the most detailed industry tables: kitchen equipment and dedicated hook-ups are 5-year there; central HVAC is building. Rev. Proc. 2002-12 is a smallwares expensing method, not a 15-year building rule.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- Restaurant buildings are generally 39-year nonresidential real property. A historic 15-year qualified restaurant property rule applied only to property placed in service from October 22, 2004 through December 31, 2017.
- Publication 5653 Chapter 7.C treats food equipment, dedicated kitchen utilities, equipment exhaust, and decorative millwork as class 57.0 property for that industry pattern.
- Central HVAC is building; separate kitchen units that meet the sole-justification test are 5-year, and the matrix says allocation of HVAC is not appropriate.
- Rev. Proc. 2002-12 lets restaurants and taverns treat listed smallwares as non-incidental materials and supplies. It does not give the structure a 15-year life.
- Rev. Proc. 97-10 is a retail motor-fuels election, not a restaurant rule.
- Bonus depreciation as of 2026 can apply to qualified equipment, décor, site work, and QIP acquired after January 19, 2025, not to the 39-year shell.
A restaurant or fast-food building is nonresidential real property, recovered over 39 years, unless a narrower statute applies to a particular improvement. The density of process equipment is what makes restaurant studies distinctive. Publication 5653 Chapter 7.C reproduces a December 27, 2004 restaurant field directive. The ATG says the matrix reflects general restaurant fact patterns and is not an official pronouncement of law.
That matrix treats food storage and preparation equipment as §1245, class 57.0, 5-year property, along with dedicated water, gas, and drain lines, equipment exhaust hoods, air makeup solely for kitchen equipment, and dedicated outlets. Central HVAC is 39-year property. Separate kitchen HVAC units that meet Treas. Reg. §1.48-1(e)(2)’s sole-justification test — machinery installed solely to meet temperature or humidity needs essential for other machinery or for processing foodstuffs — are 5-year, and the matrix states that allocation of HVAC is not appropriate.
Carpeting is treated as not permanent for the restaurant industry in that matrix. Decorative millwork and non-structural theme elements are 5-year. Restroom accessories, partitions, and fireplaces are building. Drive-through equipment is a §1245 candidate; the drive-through building opening and roof remain structure. Sign faces are typically personal property under Treas. Reg. §1.48-1(c) (neon and other signs); pylon structures are often 15-year land improvements.
Rev. Proc. 2002-12, opened for this page, provides a safe-harbor accounting method for taxpayers in the trade or business of operating a restaurant or tavern. Smallwares — ten listed categories including glassware, flatware, dinnerware, pots and pans, table-top items, bar supplies, utensils, storage supplies, service items, and small appliances costing $500 or less — may be treated like non-incidental materials and supplies under Treas. Reg. §1.162-3 and deducted when received at the restaurant and available for use. Smallwares stored at a warehouse do not meet that timing rule. Smallwares bought before a new restaurant opens are §195 start-up costs and are outside the safe harbor. The procedure does not classify the building.
Site paving, fencing, and exterior lighting follow class 00.3 unless an activity class specifically includes them. A restaurant is not a retail motor-fuels outlet merely because it shares a pad with pumps. Section 168(e)(3)(E)(iii) and Rev. Proc. 97-10 concern fuels outlets, not dining rooms.
This article is educational information, not tax advice. Proposed Super Intelligence kitchen templates are explanatory only.
Kitchen process versus building systems
Treas. Reg. §1.48-1(c) treats property in the nature of machinery as tangible personal property even outside a building. Cooking lines, refrigeration boxes, and dishwashers sit there. Treas. Reg. §1.48-1(e)(2) treats plumbing fixtures, general wiring and lighting, and central HVAC as structural components. The matrix’s dedicated-hook-up rows are the examiner’s way of drawing that line for restaurants.
Sole-justification HVAC is a separate-unit test, not a percentage of the rooftop unit. The ATG matrices say allocation of HVAC is not appropriate. A makeup-air unit that exists only because the hood exists is the fact pattern the restaurant matrix describes. A dining-room comfort unit is not.
Decorative items and flooring
Decorative millwork that enhances décor and is unrelated to building operation is 5-year in Chapter 7.C. General millwork — doors, frames, stairs, trim that operates the building — is building in the ATG millwork rows. AmeriSouth’s apartment millwork holding does not repeal the restaurant row, and the restaurant row does not decide apartment cabinets. Theme elements that are non-structural are 5-year in the restaurant matrix; fireplaces are building.
Restaurant carpeting is treated as not permanent in that matrix. Permanently affixed tile, wood, or epoxy remains a structural covering under the regulation. Do not say every restaurant floor “is” 5-year property.
Smallwares under Rev. Proc. 2002-12
The safe harbor is an expensing method for listed smallwares, not a depreciation class and not a 15-year building life. Extraordinary items — collectibles, precious-metal flatware, items of significant artistic value — are excluded. Office supplies, general cleaning supplies, and general maintenance tools are excluded. Small appliances over $500 are excluded from the small-appliance category.
Changing to the smallwares method is a change in accounting method. The 2002 procedure provided automatic-consent terms then in force. Current filing uses the automatic-change list in effect for the year of change, which a CPA confirms. Opening packages bought before the restaurant opens remain start-up costs under the procedure’s own scope rule.
Documentation
Kitchen equipment schedules, hood and makeup-air drawings, dedicated-outlet plans, theme-millwork shop drawings, and smallwares invoices kept separate from construction pay applications prevent treating dishes as building cost. New stores can use actual contractor costs. Acquired restaurants need estimates reconciled to price less land, without a pro-rata step-up.
Chain sampling is one ATG-listed approach. The guide warns that a population under 50 can limit accuracy and that models must be statistically valid. A single prototype percentage applied to every store is the rule-of-thumb method examiners are told to view with caution.
Bonus depreciation and QIP as of 2026
Qualified property acquired after January 19, 2025 is eligible for 100% bonus depreciation under Notice 2026-11. The 39-year restaurant building is not qualified property. Kitchen equipment, qualifying décor, 15-year site work, and QIP can be. Binding contracts on or before January 19, 2025 stay on the phase-down.
Interior improvements the taxpayer makes after the building was first placed in service may be 15-year QIP if they meet §168(e)(6). Enlargements, elevators, and internal structural framework are excluded. A refresh that replaces both QIP finishes and §1245 equipment should split those costs. Educational information, not tax advice.
Sources
- 1IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
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- 6IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.