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OBBBA tax changes for rental property investors

By Cedrick Reese · Updated August 9, 2026

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made several tax changes that matter to landlords and real estate investors. A few of them are genuinely significant, and unlike a lot of tax law, several were made permanent rather than set to expire. Here is what changed and what it means for a rental owner. This is general education, not tax advice; federal tax law can be amended, so confirm the current details with a CPA or at irs.gov before acting.

Federal figures, indexed and subject to future change. General education, not tax advice.

100% bonus depreciation is back, and permanent

This is the headline. OBBBA permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, with no scheduled phase-down. Under the prior law it had been dropping 20 points a year and was set to hit zero in 2027, so this is a real reversal.

For rental owners, bonus depreciation applies to the shorter-life components of a property (the 5, 7, and 15-year items such as appliances, carpeting, fixtures, and land improvements), not the building shell itself, which still depreciates over 27.5 years for residential or 39 years for commercial. A cost segregation study is what typically breaks a building into those shorter-life buckets so they can be written off immediately. The definition of qualifying property did not change; the phase-out simply went away.

A bigger Section 179 deduction

OBBBA raised the Section 179 expensing limit to a $2.5 million base, with the phaseout starting at $4 million, for property placed in service after December 31, 2024. Those amounts are indexed for inflation each year, so for 2026 they work out to roughly $2.56 million and $4.09 million. Section 179 is a separate way to expense qualifying property upfront, and for most individual landlords it overlaps with what bonus depreciation already covers, but it adds flexibility for larger operations.

The 20% QBI deduction is now permanent

The Section 199A qualified business income deduction, worth up to 20% of qualifying business income, was scheduled to expire at the end of 2025. OBBBA removed that sunset and made it permanent, and it added a new minimum deduction of $400 in 2026 for taxpayers with at least $1,000 of active QBI.

The catch for landlords: rental income does not automatically qualify. Your rental activity has to rise to the level of a trade or business under Section 162, or meet the IRS safe harbor (which generally requires 250 hours of rental services a year plus separate books and records). If it qualifies, this deduction can shelter a fifth of your rental profit, so it is worth confirming your situation with a tax pro.

1031 exchanges left intact

OBBBA preserved 1031 like-kind exchanges for real property exactly as they were. For investors who plan to trade up over time and defer gains, that continuity is good news. The mechanics are unchanged: see the 1031 exchange explained for the deadlines and rules.

A note on qualified production property

OBBBA also created a new 100% expensing election for "qualified production property," aimed at domestic manufacturing and production buildings. Most residential landlords will never touch it, but it is part of the same law and comes up in coverage, so it is worth knowing it exists and is not aimed at ordinary rentals.

What did not change: recapture at sale

Faster depreciation is a timing benefit, not free money. Everything you write off reduces your cost basis, and when you sell, the IRS recaptures that depreciation and taxes it, generally at up to 25%. See depreciation recapture in the glossary, and remember a 1031 exchange is the common tool for deferring it. As always, model your specific numbers, and get a professional opinion before making a tax move. You can run a property's baseline cash flow and returns in the free Rental Property Calculator.