ROJAS CPA & ADVISORY
Client Advisory Memorandum
TO: Real Estate Investor Clients
FROM: Rojas CPA & Advisory
DATE: July 15, 2026
RE: Five Tax Developments Real Estate Investors Should Act On in 2026 — The One Big Beautiful Bill Act (OBBBA) and Related Planning
Executive Summary
The One Big Beautiful Bill Act (“OBBBA”), signed into law on July 4, 2025, is the most consequential piece of tax legislation for real estate investors since the 2017 Tax Cuts and Jobs Act. Several provisions that were scheduled to phase out or expire are now permanent, several new opportunities have opened, and a handful of valuable incentives are sunsetting on hard deadlines — one of them this month. This memorandum summarizes the five developments we believe matter most to your portfolio in 2026 and beyond, along with the practical steps we recommend for each. Please contact our office before acting on any item; several of these provisions interact with one another, and the right answer depends on your specific facts.
1. 100% Bonus Depreciation Is Back — Permanently
What changed. Bonus depreciation had been phasing down (60% in 2024, headed to 20% in 2026 and zero in 2027). OBBBA reversed the phase-down and permanently restored 100% first-year expensing for qualified property acquired and placed in service after January 19, 2025. Both new and used property qualify, provided you had not previously used the asset.
Why it matters to you. Buildings themselves (27.5-year residential / 39-year commercial property) do not qualify — but a cost segregation study can reclassify a meaningful share of a property’s purchase price into 5-, 7-, and 15-year components (appliances, flooring, land improvements, parking, site lighting, certain electrical and plumbing) that are 100% deductible in year one. On a typical acquisition, 20%–35% of the purchase price (excluding land) can often be reclassified. Qualified Improvement Property — interior, non-structural improvements to commercial buildings, such as tenant build-outs and interior renovations — carries a 15-year life and is likewise fully deductible in the year placed in service.
Illustration. An investor purchases a $1,000,000 rental property in 2026. A cost segregation study reclassifies $250,000 into short-life components. The full $250,000 is deductible in year one — on top of regular depreciation on the remaining building — potentially creating a tax loss on a property that is cash-flow positive.
- Action: If you acquired or substantially improved property after January 19, 2025, ask us whether a cost segregation study makes sense. Watch placed-in-service dates carefully on anything straddling early 2025.
- Caution: Because permanence removes the “use it before it expires” pressure, timing bonus deductions to your income picture is now a strategy, not a race. The IRS also confirmed (Notice 2026-11, January 2026) an election to take a reduced 40% rate in the first eligible year, which can be useful for managing losses.
2. Interest Deductions Improved — But Revisit Old Elections
What changed. The Section 163(j) business interest limitation is again computed on an EBITDA-style base — depreciation and amortization are added back — for tax years beginning in 2025 and later. In plain terms: taking large depreciation deductions no longer shrinks your capacity to deduct interest. This pairs well with bonus depreciation and supports debt-financed acquisitions in a higher-rate environment.
The trap. Many leveraged real estate businesses previously made the irrevocable “real property trade or business” election to escape the interest limitation. Electing businesses must depreciate real property under the slower ADS method — which is ineligible for bonus depreciation. If your entity made that election in 2019–2024, the trade-off that justified it may no longer hold.
- Action: For existing entities with an RPTB election, we will model whether the election still benefits you. For new acquisitions and new entities, do not make the election reflexively — run the numbers first.
3. The 20% Pass-Through (QBI) Deduction Is Now Permanent
What changed? The Section 199A deduction — worth up to 20% of qualified business income from partnerships, S corporations, LLCs, and sole proprietorships — was scheduled to expire after 2025. OBBBA made it permanent, with improved income thresholds. For a rental owner with $100,000 of net rental income, the deduction is worth roughly $4,400–$7,400 in annual federal tax savings, depending on bracket.
What it takes. Rental activity must rise to the level of a trade or business, or fit within the IRS safe harbor — which generally requires 250 or more hours of documented rental services per year and contemporaneous records. Grouping (aggregation) elections can help portfolios of properties satisfy the tests together.
- Action: Start (or continue) a contemporaneous activity log now for 2026. If you own multiple properties, ask us whether an aggregation election improves your result.
4. Energy Incentives Are Sunsetting — Some Deadlines Are Immediate
What changed? OBBBA terminates several energy-related incentives. The Section 179D deduction for energy-efficient commercial buildings (worth $0.59 to $5.94 per square foot in 2026) is eliminated for projects that begin construction after June 30, 2026. Several residential energy credits expired at the end of 2025 or expire in mid-2026.
- Action: If an energy-efficiency project is under consideration, construction generally must have commenced by June 30, 2026 to preserve the 179D deduction. For future projects, re-run return-on-investment assumptions without these incentives.
Other Items Worth Knowing
- Excess business loss limit tightened. For 2026, business losses exceeding $256,000 ($512,000 for joint filers) are suspended and carried forward. Large bonus-depreciation deductions can collide with this cap — we model this before recommending a cost segregation study.
- Passive activity rules still apply. For passive investors and LP interests, accelerated deductions often become suspended passive losses rather than immediate savings. Real estate professional status (750 hours / more-than-half of working time, met annually with material participation) or offsetting passive income changes that answer.
- Section 179 expanded. The 2026 expensing limit is $2.56 million (phase-out beginning at $4.09 million). Section 179 remains useful for items bonus depreciation does not reach — roofs, HVAC, and security systems on commercial property — though it cannot create a loss.
- State conformity is not automatic. Many states — including California — do not conform to federal bonus depreciation. A large federal deduction will not reduce your California tax the same way; we prepare separate state depreciation schedules accordingly.
- SALT cap raised to $40,000. The higher cap changes the math on state pass-through entity tax (PTET) elections. Prior-year conclusions about whether a PTET election helps you should be re-examined rather than assumed.
Recommended Next Steps
- Send us closing statements for any property acquired after January 19, 2025 so we can screen for cost segregation potential.
- Tell us about planned 2026–2027 dispositions before listing — 1031 exchange and Opportunity Zone timing decisions must be made before the sale closes.
- Begin or maintain a contemporaneous rental activity log to protect the QBI deduction.
- Flag any energy-efficiency projects immediately given the June 30, 2026 construction-start deadline.
- Schedule a planning meeting if your entity previously elected out of the interest limitation rules.
This memorandum is for general informational purposes only and does not constitute tax, legal, or investment advice. The provisions described are subject to forthcoming Treasury regulations and IRS guidance, and their application depends on your specific facts and circumstances. Please consult with our office before taking action based on this memorandum.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another
