Summary

Creates a new, large immediate tax deduction for owners of long-term residential rental property. Owners can elect an allowance equal to a per-unit amount ($150,000 per unit, or $250,000 per unit for qualifying affordable-housing projects) up to the property's adjusted basis (excluding land), taken when the property is placed in service; the allowance reduces the property's basis and can be recaptured if the property leaves residential rental use within a set period. The allowance applies only to properties meeting defined conditions (U.S. property, at least two dwelling units, original use with the taxpayer, and election on the tax return). Affordable-housing projects get a larger per-unit allowance and a longer recapture period; Treasury must issue regulations and the rule changes treat these properties as depreciable section 1245 property. The rule applies to property placed in service more than 12 months after enactment.

Key Points

• Creates a one-time immediate depreciation allowance for qualifying long-term residential rental property based on a per-unit formula.
• Standard per-unit allowance is $150,000; qualifying affordable-housing projects can elect a $250,000 per-unit allowance.
• Deduction limited to 100% of the property's adjusted basis (excluding land) and reduces that basis.
• Qualifying property must be placed in service in the U.S., have at least two dwelling units, and be original use for the taxpayer.
• Recapture applies if residential-use requirements fail within 10 years (15 years for affordable-housing election).
• Elections are made on the tax return and are generally irrevocable without IRS consent; Treasury must issue implementing regulations.
• Amends depreciation recapture rules to treat these properties as section 1245 property.
• Applies only to property placed in service more than 12 months after enactment.

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