Sponsors
The bill accelerates large first-year tax deductions to lower current tax bills and encourage affordable housing investment, at the cost of potential future tax recapture and smaller long-term depreciation benefits for property owners, reduced federal revenue, and limited taxpayer flexibility.
Owners of long-term residential rental properties (including small landlords) can immediately deduct up to $150,000 per dwelling unit (or $250,000 per unit for qualifying low-income projects) in the first year, reducing their taxable income and current tax bills.
Owners/developers of qualifying low-income housing can elect the larger $250,000 per-unit allowance, increasing the financial incentive to build or preserve affordable housing units.
The allowance is allowed for Alternative Minimum Tax (AMT) purposes without section 56 adjustments, simplifying tax treatment for eligible owners and reducing the risk of unexpected AMT liabilities.
Property owners who claim the allowance face recapture if the property stops qualifying within 10 years (15 years for low-income projects), which can trigger taxable income at least equal to the allowance and produce a large unexpected tax bill.
Accelerating large first-year deductions will reduce future depreciation basis, meaning smaller depreciation deductions later and potentially higher taxable income on sale or disposition of the property.
The election to take the allowance is effectively irrevocable (except in very limited Secretary-approved circumstances), limiting taxpayer flexibility and potentially locking owners into an unfavorable long-term tax outcome.
Based on analysis of 4 sections of legislative text.
Creates an elective first-year depreciation allowance for long-term residential rental property up to $150,000/unit ($250,000/unit for qualifying low‑income projects), with multi-year recapture if rental use ends.
Introduced March 12, 2026 by Lisa Blunt Rochester · Last progress March 12, 2026
Creates a new, optional large first-year depreciation allowance for long-term residential rental buildings. Taxpayers who elect this allowance may deduct up to $150,000 per dwelling unit (or up to $250,000 per unit for qualifying low‑income projects) in the first year, subject to basis limits, with special recapture rules if the property stops being rental housing within a set period.