Sponsor
Lisa Blunt Rochester
Senator · D-DE
Senator · D-DE
The bill offers substantial up-front tax relief and stronger incentives to create or preserve low-income rental housing for property owners, at the cost of reduced near-term federal revenue and potential future tax liabilities and reduced flexibility for those owners.
Owners of long-term residential rental units (including small landlords and real-estate businesses) can immediately deduct up to $150,000 per dwelling unit (or $250,000 per unit for qualifying low-income projects) in the first year, lowering their taxable income and improving near-term cash flow.
Owners who elect the $250,000 per-unit allowance for qualifying low-income housing get a larger upfront tax incentive, increasing the financial attractiveness of building or preserving affordable rental units.
The allowance is allowed for AMT purposes without section 56 adjustments, simplifying tax treatment and reducing the risk of alternative minimum tax liability for affected owners.
The provision accelerates deductions and will likely reduce federal tax revenue in the near term, which could increase deficits or require future offsets in taxes or spending.
Taxpayers who claim the allowance face recapture if the property stops qualifying within 10 years (15 years for low-income projects), triggering taxable gain at least equal to the allowance and creating a significant future tax liability risk.
Taking large immediate deductions reduces the property's future depreciation basis, which lowers future depreciation deductions and can increase taxable income on sale or disposition.
Based on analysis of 4 sections of legislative text.
Creates a capped first-year depreciation allowance for long-term residential rental property ($150,000 per unit or $250,000 for qualifying low-income projects) with recapture if converted early.
Introduced March 12, 2026 by Lisa Blunt Rochester · Last progress March 12, 2026
Creates a one-time, first-year depreciation allowance for long-term residential rental property that lets owners expense a large portion of a building’s cost immediately. The allowance is limited to the lesser of a per-unit cap ($150,000 per dwelling unit, or $250,000 per unit for qualifying low-income projects if elected) or the property’s adjusted basis, and it applies for regular tax and AMT. If the property stops being residential rental within a set recapture period (10 years, or 15 years for qualifying affordable projects), the taxpayer must recognize gain to recapture the allowance. Taxpayers must elect the allowance on their return, and the rule applies to property placed in service more than 12 months after the law takes effect.