Tax-law changes and real estate models: questions to verify

The One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) rewrote several tax provisions that reach real estate investors directly. Three stand out for anyone buying, financing, or modeling DSCR deals in 2026: the QBI deduction is now permanent at 20%, the §179 expensing limit sits at exactly $2,560,000, and 100% bonus depreciation is back for good. Below is what each provision is, what changed, and why the change moves your after-tax math. One term up front: depreciation is the tax rule that spreads a building's cost over years, 27.5 of them for residential rental property, instead of deducting it all at once.

QBI deduction: permanent at 20%

QBI is qualified business income: profit that flows to you through a pass-through entity, one that pays no tax itself and passes income to its owners. Under TCJA that income received a 20% deduction under §199A, scheduled to sunset at year-end 2025, meaning the provision would simply expire. Rental income structured through an LLC can qualify, but only where the rental activity rises to a trade or business under §162 or the IRS rental safe harbor, and that is a facts-and-circumstances question for your CPA. The enacted OBBBA kept the rate at 20% and made the deduction permanent by removing the §199A sunset (OBBBA §70105). One caution for your model: an earlier House draft would have raised the rate to 23%, but that change did not survive into the signed law, so model 20%.

Run the arithmetic once, with illustrative numbers only. Take $60,000 of net rental income through an LLC and apply the 20% deduction rate: $60,000 × 20% = $12,000 deducted before tax is figured.

What actually changed is the expiration date. If you qualify under the income thresholds, that $12,000 QBI deduction no longer disappears after 2025. Permanence is the change, not the rate, and permanence is what a multi-year model cares about: stacked with depreciation on a new acquisition, that certainty compounds across a hold period's after-tax IRR. Run your file before you quote a client an after-tax number.

§179 expensing: exactly $2,560,000 in 2026

§179 lets you expense depreciable personal property, such as fixtures, appliances, HVAC, and certain building components, in the year of acquisition rather than depreciating it over its normal 5-, 7-, or 15-year recovery period. Expensing now instead of deducting slowly is worth real money, which is why §179 is the first lever to pull on a large acquisition or value-add play, before bonus depreciation. IRS Rev. Proc. 2025-32 §4.24 sets the 2026 figures. The phaseout row means the limit starts to shrink once total qualifying purchases pass that figure.

100% bonus depreciation is permanent

Bonus depreciation is a separate accelerator, letting you deduct a set percentage of qualifying property's cost immediately. TCJA's 100% version was phasing down year by year, shrinking that immediate deduction with each tax year, until OBBBA reversed the phasedown and restored 100% permanently for property acquired after January 19, 2025. The table shows the trajectory you no longer have to model around.

Combine that with a cost segregation study, an engineering analysis that reclassifies building components out of 27.5-year residential property and into 5-, 7-, and 15-year personal or land-improvement property. Shorter lives plus 100% bonus depreciation let a DSCR investor pull a substantial portion of the building's cost basis into year-one deductions.

What it means on a DSCR acquisition

• QBI at 20%, now permanent: the sunset risk leaves the model. On a single deal that certainty is not enormous, but it persists across a portfolio's hold period.
• Use §179 before bonus depreciation. It is capped at your business income and does not create a net operating loss by itself, so apply it first to tangible personal property for the guaranteed deduction, then let bonus depreciation handle the rest.
• Bonus depreciation plus cost segregation: a study on a $500K acquisition might reclassify $75–$100K into accelerated categories. At 100% bonus depreciation that is a $75–$100K year-one deduction against rental income, if you qualify under the passive activity loss rules.

One honest caveat before you book any of this into a model. These provisions interact with §469 passive activity loss rules and the 3.8% net investment income tax, so not every investor can use them all in the acquisition year. Real estate professionals, short-term rental operators with material participation, and high-income investors who hit the PAL exception each land somewhere different. Confirm with a CPA before booking the benefit.

The tax code stopped shrinking. 20% QBI, $2.56M §179, 100% bonus dep: all permanent. The after-tax math on DSCR acquisitions changed in 2026.

The rates matter less than their durability. QBI, §179, and bonus depreciation now sit in the code with no expiration date attached, which is what lets a hold-period model stop hedging against a sunset. Knowing what each one is, and what OBBBA changed about it, leaves you with the single question this page cannot answer: whether you can actually use the deductions this year. That one belongs to your CPA.

This explains the law; it isn't advice on your file. Tax and legal conclusions belong with a qualified professional, and any financing detail should be checked against the responsible provider's current, dated eligibility and pricing materials.

• Deal Analyzer →
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• P.L. 119-21 (H.R. 1) at Congress.gov →
• What is DSCR? →