February 16, 2026

Recent U.S. tax legislation, including provisions enacted under the One Big Beautiful Bill Act (OBBBA) in July 2025, introduced several permanent changes and phaseouts that significantly impact real estate owners, investors and developers. These updates affect depreciation, business interest limitations, specific incentives and long-standing planning strategies among other areas. 

Below are 10 key real estate tax opportunities to consider, and the practical steps you can take to maximize your tax savings potential.

1. Permanent 100% Bonus Depreciation
   • The Law: 100% bonus depreciation is permanently restored for qualifying property (generally assets with a useful life of 20 years or less, such as land improvements and certain building components) acquired and placed in service after January 19, 2025.
   • What To Do: Accelerate deductions through a cost segregation study on new or recently acquired properties. Reclassifying building components into shorter-life asset classes (e.g., personal property, land improvements) allows you to fully leverage bonus depreciation to boost near-term cash flow.
2. Enhanced Section 179 Expensing
   • The Law: The Section 179 deduction limit increases to $2.56 million, with the phase-out starting at $4.09 million in assets placed in service (adjusted annually for inflation). Qualifying property includes specific improvements to nonresidential real property, such as interior improvements, roofs, and HVAC systems.
   • What To Do: Use Section 179 strategically alongside. or in place of, bonus depreciation to maximize deductions across asset classes and reduce current tax liability. Keep in mind that Section 179 expensing is subject to net income limitations.
3. Favorable Interest Expense Deduction (Section 163(j))
   • The Law: For tax years beginning after December 31, 2024, adjusted taxable income (ATI) is calculated using a more favorable EBITDA-based calculation, generally increasing the amount of deductible interest.
   • What To Do: Revisit debt structures, refinancing strategies, and Real Property Trade or Business (RPTB) elections in leveraged positions to ensure interest deductions are optimized in a higher-rate environment. Most real estate partnerships with outside investors will benefit from the RPTB election.
4. Permanent 20% Qualified Business Income (QBI) Deduction
   • The Law: The 20% QBI deduction for pass-through entities (S corporations, partnerships, etc.) is now permanent, with improved higher income limit thresholds.
   • What To Do: Evaluate aggregation elections to group activities and maximize the QBI deduction while monitoring income limitations and wage/property test.
5. Expanded Opportunity Zones (OZ) & Low-Income Housing Tax Credits (LIHTC)
   • The Law: The OZ program becomes permanent with a new system launching in 2027 that includes enhanced rural incentives and a revolving 5-year capital gain deferral period. The LIHTC program sees a permanent increase in 9% allocations and reduces the bond financing requirement for 4% credits to 25%, effective January 1, 2026.
   • What To Do: Plan capital gain deferral strategies using OZ investments where applicable. For affordable housing developers and investors, reassess project feasibility in light of expanded LIHTC flexibility.
6. Phaseout of Certain Energy Credits
   • The Law: The Section 179D deduction for energy-efficient commercial buildings terminates for construction starting after June 30, 2026. Several residential energy credits expire by the end of 2025 or mid-2026 depending on the credit.
   • What To Do: Expedite energy efficient projects to qualify before sunset dates. After expiration, reassess project ROI for future projects assuming these credits will not apply.
7. Real Estate Professional Status
   • The Law: Taxpayers must annually meet both the 50% and 750-hour tests in real property trades or businesses in which they materially participate to qualify as a real estate professional. These participation levels can be more easily achieved when a grouping election is in place.
   • What To Do: When properly documented, real estate professional status can convert passive rental losses into nonpassive losses, allowing them to offset other income and potentially avoid the 3.8% Net Investment Income Tax (NIIT).
8. Section 1031 Like-Kind Exchanges
   • The Law: Gain deferral remains available for exchanges of real property held for productive use in a trade or business or for investment when exchanged for like-kind real property. Keep in mind that Section 1031 exchange treatment is no longer available for non-real property (such as FF&E).
   • What To Do: Use like-kind exchanges to simplify or diversify real property assets while deferring gain recognition for ongoing investment strategies. For aging investors, consider options such as Delaware Statutory Trusts to minimize management responsibilities.
9. Completed Contract Method
   • The Law: Developers may use the completed contract method for many residential construction projects for contracts entered into after July 4, 2025, allowing income deferral to the year the project is completed. 
   • What To Do: Consider changing over to the completed contract method to delay income recognition to a future tax year.
10. State & Local Tax (SALT) Deduction for Businesses and Expanded Individual Cap
    • The Law: Businesses retain full federal deductibility of state and local taxes, including real estate taxes. The individual SALT deduction cap increases to $40,000 for certain taxpayers through 2029 (indexed at 1% annually).
    • What To Do: Integrate PTE tax elections and state tax planning strategies to maximize both business and individual SALT deductions.

These legislative changes create meaningful planning opportunities for real estate owners, operators, and developers. Proactive modeling and coordination with tax advisors can help ensure these provisions translate into improved cash flow, reduced tax exposure, and stronger long-term investment outcomes.