Assisted Living Facilities
Assisted living sits between housing and healthcare. Whether a building is 27.5-year residential rental property depends on the §168(e)(2) dwelling-unit test, which this page describes and does not decide. No IRS assisted-living matrix was found.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- There is no IRS assisted-living cost segregation matrix in Publication 5653.
- Section 168(e)(2) uses dwelling-unit income and excludes hotel-, motel-, or similar transient units; it does not use the state license name.
- How care-service revenue enters the 80% test is unverified in the official sources opened for this research (flag F-07). Confirm with a CPA.
- Medical and bathing equipment can be personal property even if the building is 39-year property.
- HCA is the closest major case for healthcare interiors; the IRS agreed with the test, not every item result.
- Bonus depreciation as of 2026 can apply to qualified shorter-lived property acquired after January 19, 2025, not to the building shell.
Assisted living often looks like apartments plus services: meals, medication reminders, and help with daily activities. Rooms may have residential fixtures. Licenses, nurse-call systems, and commercial kitchens may look institutional. The Code does not have an “assisted living” recovery period. The question is whether a building or structure is residential rental property because 80% or more of its gross rental income is from dwelling units.
A dwelling unit is a house or apartment used to provide living accommodations, but not a unit in a hotel, motel, or other establishment more than one-half of the units in which are used on a transient basis. Publication 527 restates that rule. Neither source, as opened here, maps assisted-living licenses to 27.5 or 39 years. CostSeg SI’s property research marked this as a high-risk fact-dependent issue. This page does not conclude that an assisted-living building is residential or nonresidential.
Once a CPA sets the building class, specialized bathing equipment, movable furniture, and kitchen process equipment are analyzed as personal property or structural components under Treas. Reg. §1.48-1. The restaurant matrix can be a cross-reference for in-building restaurant assets. Nurse-call and medical-gas systems have no assisted-living matrix; the closest official discussions are HCA (hospital components) and the pharmaceutical matrix’s special gas and water rows, used only as analogy and flagged as such.
Hospital Corporation of America applied Whiteco permanence factors and Scott Paper functional allocation to hospital items. The IRS issued AOD 1999-008 agreeing that ITC-era tangible-personal-property tests apply under MACRS and not agreeing to every asset determination. Use HCA for the legal test. Do not copy its item list into a memory-care wing.
Central HVAC, general lighting, restroom plumbing fixtures, elevators, and sprinklers are structural components in Treas. Reg. §1.48-1(e)(2) unless a specific exception, such as the sole-justification HVAC test, is met on the facts. Allocation of HVAC is not appropriate under the ATG matrices. Dedicated equipment power may be analyzed under Chapter 8.A’s design-load approach when the facts support it.
This article is educational information, not tax advice. Proposed Super Intelligence healthcare overlays are explanatory only.
Why the license name does not set MACRS class
State licensing as “assisted living,” “residential care,” or “memory care” is not a recovery period. The 80% test is federal and income-based. Transient or institutional lodging can fail the dwelling-unit definition even when residents stay for years, if the establishment is of the hotel/motel kind the statute describes — a comparison that needs legal judgment.
If more than 20% of a building’s gross rental income is from non-dwelling sources, the building is not residential rental property. Whether care fees are “rental income from dwelling units” is the unverified question. Do not bury it in a marketing assumption.
Equipment, kitchens, and building systems
Specialty tubs, lifts, and movable medical equipment are typically tangible personal property under Treas. Reg. §1.48-1(c). The rooms, wet walls, and general plumbing around them often are not. Dedicated water, drain, and power to a specific machine are the usual study lines; general restroom plumbing is listed as a structural component in the regulation.
A central kitchen can be reviewed against the restaurant matrix for food equipment, dedicated hook-ups, exhaust hoods, and sole-justification kitchen HVAC. Restroom accessories and partitions are building in that matrix. Decorative theme millwork is 5-year in the restaurant matrix and was structural in AmeriSouth’s apartments. Assisted-living corridors are not automatically either one.
Documentation
Resident agreements that split housing and service charges, occupancy and respite-stay reports, licenses by building, medical-equipment inventories, and kitchen drawings are the records that make the statutory test and any matrix analogy usable. Acquisition studies still need a land-first allocation and a field inspection.
The ATG expects a legal analysis with citations for each §1245 claim. Citing “assisted living industry practice” is not a citation. Citing HCA for a tub’s dedicated outlet is closer, and still fact-specific.
Bonus depreciation as of 2026
Qualified property acquired after January 19, 2025 can be eligible for 100% bonus depreciation. The building, whether 27.5 or 39 years, is not qualified property. Equipment, dedicated process utilities that are personal property, furnishings, and 15-year site work can be. Binding contracts dated on or before January 19, 2025 remain on the phase-down.
QIP applies only to later interior improvements of nonresidential real property and excludes enlargements, elevators, and internal structural framework. It is available only if the building is nonresidential. Confirm class first. Educational information, not tax advice.
Open issue (flag F-07)
How assisted-living income counts toward the 80% residential test has no specific IRS guidance in the sources opened for this inventory. Treat it as a professional-judgment issue. Do not invent a typical reclass percentage or a rule that assisted living “is” 39-year property.
Skilled-nursing or hospital wings on the same site are medical property and should be classified on their own facts. See the medical-and-healthcare page for HCA and the pharmaceutical matrix.
Sources
- 1
- 2
- 3
- 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.
- 5
- 6