Sponsors (5)
Creates an elective 100% first-year depreciation allowance for qualifying long-term residential rental units capped at units×$150k ($250k for elected affordable projects).
The bill offers substantial near-term tax relief to rental property owners—especially for affordable housing projects—to spur construction and rehabilitation, but it shifts costs and risks onto owners (through recapture and reduced future deductions), reduces near-term federal revenue, and limits taxpayers' flexibility in future tax choices.
Owners of qualifying rental properties can immediately deduct a large per-unit allowance (up to $150,000 per market-rate unit or $250,000 for qualifying affordable projects), lowering taxable income in the year the property is placed in service.
Low- and moderate-income renters are more likely to benefit over time because the larger per-unit allowance and longer recapture period for affordable projects create a stronger incentive to build or rehabilitate affordable housing.
Investors subject to the Alternative Minimum Tax (AMT) face simpler, clearer tax treatment because the allowance is permitted for AMT purposes without section 56 adjustments, improving after-tax return predictability for those taxpayers.
Owners who take the large upfront deduction face a material risk of recapture tax if the property stops qualifying within the 10-year (or 15-year for affordable projects) recapture period, creating potential unexpected future tax liabilities.
The special allowance reduces the property's adjusted basis, which lowers future depreciation deductions and can increase taxable gains on sale, raising long-term tax costs for owners.
Large upfront tax benefits for rental developers and owners will reduce near-term federal tax revenue, potentially increasing budgetary pressures that could affect other spending priorities or require offsetting revenue measures.
Based on analysis of 2 sections of legislative text.
Official title: To amend the Internal Revenue Code of 1986 to provide bonus depreciation for long-term residential rental housing.
Introduced May 21, 2026 by Linda T. Sánchez · Last progress May 21, 2026
Creates a new, elective 100% first-year depreciation (special allowance) for qualifying long-term residential rental property. The allowance equals the lesser of (A) number of dwelling units × $150,000 (or $250,000 per unit for an elected qualifying affordable-housing project) and (B) the property’s adjusted basis (excluding land); it reduces basis before other depreciation and is allowed for AMT purposes. The allowance must be elected and designated on the taxpayer’s return (generally irreversible without IRS consent). If the property stops meeting the required use rules within a set recapture period (10 years for most rental property, 15 years for affordable-housing projects), taxpayers face ordinary-income recapture under section 1245 with basis adjustments. Treasury must issue regulations to coordinate with existing low-income housing rules and set certification procedures. The rule applies to property placed in service more than 12 months after enactment.