Senior Living Facilities
Independent-living campuses mix dwelling units with dining, clinic, and office buildings. Residential versus nonresidential classification follows the §168(e)(2) 80% dwelling-unit test, which this page describes but does not decide. No IRS senior-living matrix was found.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- “Senior living” is a business description, not a MACRS class.
- A building is residential rental property only if 80% or more of its gross rental income is from dwelling units under §168(e)(2).
- Whether monthly service fees, meals, and care charges count as dwelling-unit rental income is not resolved in the IRS sources opened for this research (flag F-07).
- Separate dining halls, clinics, and offices may be nonresidential buildings even when cottages look like apartments.
- Hospital Corporation of America is a hospital-component case; it does not classify cottages as 27.5-year property.
- Confirm the test and any bonus-depreciation dates with a CPA. This is educational information, not tax advice.
Independent-living cottages and apartment-style units can look like multifamily property. Dining rooms, therapy suites, and administrative offices on the same campus look like nonresidential or healthcare property. MACRS does not ask what the brochure calls the campus. It asks, building by building, whether 80% or more of gross rental income is from dwelling units — houses or apartments used to provide living accommodations — and it excludes hotel-, motel-, or similar transient units.
Publication 527 restates that test. Neither the statute nor Publication 527, as opened here, assigns “senior living” or “independent living” to 27.5 or 39 years. CostSeg SI’s property research found no IRS field directive for senior living and flagged the service-fee question as unverified. Do not assume the 80% test is met because residents have kitchens and leases. Do not assume it is failed because meals are bundled. Ask a CPA to apply the statute to the rent roll.
If a dwelling building is residential rental property, Chapter 7.H is the closest examiner table for unit appliances, removable flooring of the kinds that matrix treats as not permanent, and dedicated appliance hook-ups. If a building contains a restaurant-style kitchen serving residents, Chapter 7.C says that for restaurant assets located within an apartment building, examiners should refer to the restaurant directive. That cross-reference is about kitchen equipment classification, not about converting the dwelling building into a 39-year restaurant.
Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997), applied investment-tax-credit tests to hospital components under ACRS and MACRS. The IRS acquiesced in the legal test and not in every item result (AOD 1999-008). HCA is relevant to medical-wing equipment and dedicated utilities. It is not authority that independent-living cottages are 27.5-year property or that they are 39-year property.
Site work — surface parking, walks, fencing, exterior recreation — is usually reviewed as class 00.3 when it is a depreciable land improvement. A stand-alone clinic or office building is generally 39-year nonresidential real property. Furnishings in common living rooms can be personal property under Treas. Reg. §1.48-1(c) even when the room is inside a residential building.
Proposed Super Intelligence campus maps are explanatory only. Educational information, not tax advice.
The 80% test and bundled fees
Run the test on each building or structure. Include the rental value of any taxpayer-occupied portion. Separate, if the records allow, dwelling rent from charges for meals, housekeeping, transportation, and care. The official sources opened for this inventory do not say how those fees enter the numerator or denominator for senior living.
Transient-use exclusion still applies if more than half the units in the establishment are used on a transient basis. Respite stays and hotel-style guest suites can matter. This page does not decide that issue for any campus.
Unit interiors and dining kitchens
Unit appliances and removable carpet or VCT are reviewed on Chapter 7.H rows when the residential matrix applies. Kitchen cabinetry in a dwelling remains building in that matrix. A commercial kitchen’s food equipment, dedicated gas, water, and drain lines, equipment exhaust hoods, and sole-justification kitchen HVAC are 5-year items in the restaurant matrix — for restaurant assets, on restaurant facts.
Do not copy the restaurant decorative-millwork row onto every resident corridor, and do not copy AmeriSouth’s apartment millwork denial onto a dining room’s theme carpentry without facts. Each matrix warns it may not apply outside its industry.
Documentation
Need rent rolls that isolate housing charges, copies of resident agreements, licensed-versus-unlicensed building lists, site plans that show which structures are separate buildings, and kitchen drawings if restaurant-matrix rows will be used. Acquisition files still require a land-first allocation and, for used property, the qualified-appraiser point the ATG draws from AmeriSouth.
Photographs of unit kitchens versus the central kitchen, and of clinic wings versus cottages, prevent treating the campus as one asset. The ATG residual method — costing only short-lived items and dumping the rest into the building — can skew results toward §1245 and is described as less accurate.
Bonus depreciation as of 2026
Qualified property acquired after January 19, 2025 is eligible for 100% bonus depreciation under Notice 2026-11. A 27.5- or 39-year building is not qualified property. Unit appliances, dining equipment, furnishings, and 15-year site work can be if they qualify. Binding contracts on or before January 19, 2025 follow the phase-down.
QIP can apply only to later interior improvements of a building that is nonresidential real property. It does not apply to a residential rental cottage. Confirm building class before discussing QIP. This is educational information, not tax advice.
Limits (flag F-07)
No IRS senior-living matrix was found. Do not invent a typical reclass percentage or a rule that independent living “is” 27.5-year property. Describe the statutory test, gather the income records, and have a CPA apply them.
Assisted-living and skilled-nursing wings on the same campus are separate structures or uses and are discussed on the assisted-living and medical pages. Do not import those uses into the cottage class without running the test again.
Sources
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- 4IRS 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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