Paving Depreciation Life: Complete Tax Guide for Contractors

When you invest in a new parking lot or driveway for your business, you're looking at a significant expense. The good news is that the IRS lets you recover those costs through depreciation deductions over time.

Understanding Paving as a Depreciable Asset

Your asphalt parking lot qualifies as a land improvement, which the IRS treats differently from the land itself. While you can't depreciate land, you can depreciate improvements that make your property more useful for your business.

To qualify for depreciation, your paving project must meet these requirements:

• You own the property (even if you're still paying a mortgage)
• The paving helps you produce taxable income for your business
• The asset has a clear useful life
• You'll use it for more than one year

The 15-Year Depreciation Period

The IRS assigns a 15-year recovery period for land improvements, such as roads and sidewalks. In practice, paved parking lots and driveways fall in this 15‑year land‑improvement category. This paving depreciation life means you can spread your paving costs across 15 years of tax deductions.

Here's what that looks like in practice: Your annual deductions are calculated using IRS MACRS tables rather than simple division. For a $90,000 parking lot, using MACRS depreciation methods will give you higher deductions in the early years (typically $8,000 to $9,000 per year) that gradually decline to lower amounts in later years, with the total recovered over 15 years.

The depreciation clock starts when you place the paving in service. That's the date your parking lot is ready and available for use, not necessarily when construction began.

How Physical Lifespan Differs from Tax Lifespan

Your asphalt parking lot will likely last 15 to 25 years with proper maintenance. Notably, concrete will typically last 5 to 35 years longer (with proper maintenance and depending on conditions), offering significantly better value over its lifespan. The 15-year paving depreciation life aligns well with this physical lifespan, but they serve different purposes.

Physical lifespan refers to how long your pavement actually functions before needing replacement. Regular maintenance, like sealcoating, can extend this to 30 years or more.

Tax lifespan is simply the IRS-mandated period for recovering your investment through deductions. You continue claiming depreciation even if your parking lot stays functional beyond 15 years, until you've recovered your full cost.

Calculating Your Depreciation

Most paving contractors use the Modified Accelerated Cost Recovery System (MACRS). Under MACRS, 15-year property uses the 150% declining balance method, which provides higher deductions in early years that decline over time. 

You can also elect to use the straight-line method if you prefer even deductions across the 15-year period.

What your depreciable basis includes

• The cost of materials and labor
• Site preparation directly related to paving
• Grading and excavation for the paved area
• Storm drains and catch basins within the paved surface

What you can't include

Land costs remain separate: If you paid $200,000 for a property and $50,000 for the land, you can only depreciate the $150,000 in building and improvements.

General land preparation costs like clearing, grading, or demolition that benefit the entire property (not just the paved area) get added to your land basis. You can't depreciate these costs.

When Depreciation Starts and Stops

You start claiming depreciation when your paving is ready for use. For a parking lot, that's when customers can park, even if you haven't officially opened for business yet.

Let's say a paving contractor finishes your lot on November 15. Even if you don't open until January, you can start depreciating in November because the lot was ready and available.

You stop depreciating when you've recovered your full cost or when you sell the property. If your business closes temporarily, you can still claim depreciation. The pandemic forced many businesses to shut down for months, but they continued to depreciate their parking lots during that time.

Maintenance vs. Capital Improvements

The key difference between maintenance and capital improvements is how you deduct them on your taxes. Maintenance like sealcoating and patching is deducted immediately, whereas capital improvements like resurfacing or new sections must be depreciated over 15 years. 

The IRS separates routine upkeep from major projects that add value or extend useful life.

Regular maintenance expenses get deducted in full the year you pay them. These include:

• Sealcoating every 2–3 years
• Crack filling
• Patching potholes
• Striping and repainting lines
• Power washing or sweeping

You must depreciate capital improvements over 15 years, including:

• Complete resurfacing or overlay
• Adding new sections to your parking lot
• Installing new drainage systems
• Major structural repairs

The IRS looks at what kind of work you're doing. You can deduct regular upkeep like sealcoating and crack filling immediately as maintenance. You must depreciate major work like complete resurfacing over 15 years as a capital improvement.

Resurfacing: A Special Case

When you resurface your existing parking lot, you're making a capital improvement. The resurfacing cost starts a new 15-year depreciation period as a separate asset.

Your original parking lot continues its depreciation schedule. The resurfacing layer depreciates separately. This creates two depreciation schedules running at the same time.

For example, you installed a parking lot in 2015 for $100,000. In 2024, you resurface it for $40,000. You continue depreciating the remaining basis of the original lot while starting a new 15-year schedule for the $40,000 resurfacing.

What Happens After 15 Years?

After 15 years, you've recovered the full cost of your parking lot through tax deductions. IRS Publication 946 says you stop depreciating when you've recovered your cost or when you stop using the property, whichever happens first.

Once you finish the 15-year period, you stop claiming depreciation on that paving project. Your parking lot stays on your books at zero value as long as you own and use it.

If your parking lot is still functional after 15 years, you have several options.

• Keep using it with no further deductions: You continue operating with a fully depreciated asset. This benefits your cash flow since you've already recovered your investment through tax deductions.
• Perform major resurfacing or reconstruction: Big projects that count as capital improvements start their own 15-year depreciation period as a separate asset.
• Replace it entirely: A complete replacement creates a new asset with a fresh 15-year depreciation schedule based on the new cost.

Does Concrete Paving Have the Same 15-Year Life?

Yes, concrete paving follows the same 15-year depreciation period as asphalt. Even though properly maintained concrete will last longer than asphalt, the IRS doesn't distinguish between materials when it comes to parking lots, driveways, and other paved surfaces. 

They're all classified as land improvements with a 15-year recovery period under MACRS, which is shorter than building depreciation life.

This applies whether you're installing:

• Concrete parking lots
• Asphalt driveways
• Mixed concrete and asphalt surfaces
• Pervious concrete or porous asphalt

What matters is the function, not the material. If it's a paved surface that improves your land for business use, it gets the 15-year depreciation period.

One key difference: Concrete lasts 25–50 years with proper maintenance, whereas asphalt lasts 15–25 years. This means your concrete paving often stays functional 10–35 years after you finish depreciating it, which can boost your return on investment.

Making the Most of Your Paving Investment

Understanding the 15-year depreciation period helps you decide when to build, maintain, or replace your parking areas. You can't change the IRS schedule, but you can plan your paving projects to get the best tax treatment.

Regular maintenance extends your pavement's physical life and provides immediate tax deductions. Major improvements require depreciation but add value to your property. Balancing these two approaches keeps your property in good shape while managing your tax obligations effectively.

Track Your Paving Projects with OneCrew

Your paving projects can represent a significant investment in your business. Understanding the paving depreciation life and taking full advantage of available deductions helps you recover that investment and reinvest in your company's growth. 

OneCrew can help you make the most of your investments. It is a platform purpose-built for project-based paving contractors. 

Why paving contractors choose OneCrew over generic alternatives:

• Built for paving: OneCrew understands asphalt and concrete workflows, estimating, scheduling, crew dispatch, and job costing workflows tailored to paving.
  
  
• Configurable estimating: Build detailed estimates with cost calculators, material databases, and automated labor calculations.
  
  
• Fewer tools to manage: Replace separate estimating apps, crew calendars, client messaging, and invoicing with a single platform.
  
  
• Integrated customer portal: Clients view and sign proposals, view and pay invoices, share photos and documents, and use chat-style messaging with your team in one place.

Book a free demo to see how OneCrew simplifies paving operations.

FAQs

1. Can I depreciate a parking lot I'm leasing to another business?

Yes, you can depreciate a parking lot you're leasing to another business over 15 years, as long as you own the property. The fact that a tenant uses it doesn't affect your depreciation rights. You're still the owner bearing the cost of the asset's decline in value over time.

2. What if I use part of my parking lot for personal use?

If you use part of your parking lot for personal use, you can only depreciate the business-use portion. For example, if you reserve 10 of 100 total spaces for personal use, you can depreciate 90% of the parking lot cost. The 10% personal-use portion doesn't qualify for depreciation deductions.

3. Does the 15-year period apply to all paving work I do? 

Yes, the 15-year period applies to all business parking lots, driveways, and similar paved areas. However, items like parking lot lights and signs might count as separate assets with different depreciation timelines. Talk to your tax advisor to make sure you're classifying everything correctly.

4. If I sell my property after 8 years, does the buyer continue my depreciation schedule?

No, the buyer cannot continue your depreciation schedule if you sell your property after 8 years. The new owner establishes their own cost basis based on their purchase price and starts a fresh 15-year depreciation period. You'll face depreciation recapture on the depreciation you claimed. Tax rates vary from 25–37% depending on whether the parking lot is classified as Section 1245 or Section 1250 property. Consult your tax advisor for your specific situation.