Medical and Healthcare Facilities
Hospitals, imaging centers, and medical office buildings are generally 39-year nonresidential real property. HCA is the leading hospital classification case. There is no IRS medical-office matrix. Equipment is typically personal property; the rooms around it often are not.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- Medical buildings are generally 39-year nonresidential real property unless a narrower statute applies to a particular improvement.
- Hospital Corporation of America held that ITC tests in Treas. Reg. section 1.48-1 apply under MACRS to hospital items. The IRS agreed with the test, not the item-by-item results (AOD 1999-008).
- There is no separate IRS medical-office or clinic matrix in Publication 5653.
- Publication 946 lists high-technology medical equipment among assets with a 5-year ADS period; GDS class still depends on the asset or activity class.
- The pharmaceutical and biotechnology matrix applies to drug-manufacturing and biotech plants, not to a typical clinic.
- Bonus depreciation as of 2026 can apply to qualified equipment, dedicated process utilities, and QIP acquired after January 19, 2025, not to the 39-year building.
Hospitals, imaging centers, ambulatory surgery centers, and medical office buildings are generally nonresidential real property. Treas. Reg. section 1.48-1(e)(1) treats them as buildings that provide working and shelter space. The classification fight is over built-in items that serve equipment rather than the building: specialized plumbing, dedicated power, medical gases, and sometimes casework.
Hospital Corporation of America and Subsidiaries v. Commissioner, 109 T.C. 21 (1997), applied Whiteco permanence factors and Scott Paper functional allocation to hospital components. The IRS issued AOD 1999-008 acquiescing in the holding that pre-1981 ITC definitions of tangible personal property still apply under ACRS and MACRS, and nonacquiescing in the court's determinations for particular assets. Use HCA for the legal test. Do not copy its item list into a dental office.
There is no healthcare matrix in Publication 5653. The pharmaceutical and biotechnology matrix (Chapter 7.D) covers manufacturing and R&D plants. Clean-room shells are 39-year building in that table; HEPA units, process power, and special water or gas systems are personal property with an activity-class life. Applying those rows to a clinic is an analogy the ATG itself says may not fit another industry.
Treas. Reg. section 1.48-1(c) lists testing equipment and production machinery as tangible personal property even when attached to a building. Imaging machines, laboratory analyzers, and similar equipment sit there. Treas. Reg. section 1.48-1(e)(2) lists plumbing fixtures, electric wiring and lighting fixtures, and central HVAC as structural components. Dedicated branch circuits and medical-gas outlets that exist only for a named machine are the usual study lines; general exam-room outlets and restroom plumbing stay with the building unless facts support a different result.
Publication 946's ADS table includes high-technology medical equipment at 5 years. That is an ADS listing, not a finding that every exam light is 5-year GDS property. Activity class for a physician practice often falls under class 57.0 (personal and professional services) for section 1245 assets, subject to Rev. Rul. 2003-81's asset-category-first rule. A hospital's activity class can differ. Do not assign one class to every healthcare building.
This page is educational information, not tax advice. Proposed Super Intelligence medical overlays are explanatory only.
Equipment utilities versus building systems
ATG Chapter 8.A describes functional allocation of primary and secondary electrical distribution by design (demand) load to section 1245 end uses. The guide says a properly applied allocation should not be challenged. It also says allocation of HVAC is not appropriate. Sole-justification HVAC — a separate unit required for machinery or processes — can be personal property under Treas. Reg. section 1.48-1(e)(2). Comfort cooling for waiting rooms is building.
Special water, gas, and waste systems are section 1245 in the pharmaceutical matrix when they serve process equipment. Medical oxygen and vacuum serving imaging or operating rooms are often analyzed on that analogy. Increased slab thickness alone is not enough to make a foundation personal property; the pharmaceutical matrix says so expressly.
Casework, flooring, and lighting
The auto-dealership matrix treats retail-activity cabinetry as 5-year and restroom, break-room, and office cabinetry as building. Nurses' stations and lab casework are fact-specific: accessory to the medical activity, or part of the room. HCA decided items one by one. AmeriSouth, in apartments, kept cabinets with the building. Neither case is a clinic holding.
Removable flooring may be personal property under some industry matrices; permanently adhered tile is a structural covering under the regulation. Specialty lighting that exists only for a procedure can be personal property; general illumination is building. Do not say every exam light is 5-year property in every clinic.
Documentation
Equipment schedules, one-line diagrams, medical-gas drawings, room-by-room load letters, and invoices that separate machines from room construction are the records Chapter 4 expects. HCA and Scott Paper both turned on evidence of what the wiring and outlets actually served. Missing panel labels were fatal to an electrical allocation in AmeriSouth.
Acquisition studies need land valued first and a field inspection. A written section 1060 allocation, if the purchase is an applicable asset acquisition, can bind the parties under Peco Foods. Not every clinic purchase is that kind of deal.
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 medical building is not qualified property. Equipment, qualifying dedicated utilities, furnishings, 15-year site work, and QIP can be. Binding contracts on or before January 19, 2025 stay on the phase-down.
Later interior improvements the taxpayer makes to a nonresidential medical building may be QIP if they meet section 168(e)(6). Enlargements, elevators, and internal structural framework are excluded. Section 168(n) qualified production property is a manufacturing election; a clinic is not a factory, and this page draws no QPP eligibility conclusion. Educational information, not tax advice.
Limits
No healthcare matrix exists. Analogies to Chapter 7.D or to HCA's hospital list must be labeled as such. Do not invent a typical medical reclass percentage.
Assisted-living and senior-living buildings raise a different first question — the 80% dwelling-unit test — which those pages describe and do not decide. Do not import a 39-year assumption from this page onto a licensed residential campus without running that test.
Sources
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- 3IRS 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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- 5IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.
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