2026 Bonus Depreciation Guide: What OBBBA Means for Real Estate
100% bonus depreciation is back permanently. Learn how the One Big Beautiful Bill Act (OBBBA) affects real estate investors and the Lazy 1031 strategy in 2026.
The Big News: 100% Bonus Depreciation Is Permanently Restored
In a major win for real estate investors, 100% bonus depreciation has been permanently restored under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. This reverses the gradual phase-out that began in 2023 and restores one of the most powerful tax benefits available to property owners.
For investors using the Lazy 1031 strategy, this legislation is significant. The ability to claim 100% first-year depreciation on qualifying property components directly impacts how much capital gains can be offset through passive real estate investments.
What Changed Under the One Big Beautiful Bill Act (July 2025)
The Tax Cuts and Jobs Act of 2017 (TCJA) originally provided 100% bonus depreciation for qualifying property placed in service through 2022. Under that law, the bonus percentage was scheduled to decrease:
| Year | Original TCJA Schedule | Post-OBBBA |
|---|---|---|
| 2022 | 100% | 100% |
| 2023 | 80% | 100% |
| 2024 | 60% | 100% |
| 2025 | 40% | 100% |
| 2026 | 20% | 100% |
| 2027+ | 0% | 100% |
Key Changes in OBBBA
- 100% bonus depreciation restored permanently for qualifying property
- No sunset provision—unlike TCJA, this change is permanent
- Retroactive application to property placed in service on or after January 1, 2023
- Used property remains eligible (TCJA had already allowed this)
- Section 179 limits increased to $2.5 million (up from $1.16 million)
Effective Date
The new rules apply to property placed in service on or after January 1, 2023. Investors who took reduced bonus depreciation in 2023, 2024, or early 2025 may be able to file amended returns to claim the additional depreciation. Consult your tax advisor about your specific situation.
What Assets Qualify for 100% Bonus Depreciation
Not all property qualifies for bonus depreciation. Understanding which assets qualify—and which don't—is essential for planning your Lazy 1031 strategy.
Qualifying Property (IRC Section 168(k))
Property that qualifies for 100% bonus depreciation includes:
-
Modified Accelerated Cost Recovery System (MACRS) property with a recovery period of 20 years or less:
- 5-year property (appliances, carpets, certain equipment)
- 7-year property (furniture, fixtures, some equipment)
- 15-year property (land improvements, site work, qualified improvement property)
-
Qualified Improvement Property (QIP): Interior improvements to nonresidential buildings
-
Used property: Unlike pre-TCJA law, bonus depreciation applies to used property as long as it's new to the taxpayer
Property That Does NOT Qualify
- Real property (buildings): Structures with 27.5-year (residential) or 39-year (commercial) recovery periods
- Land: Never depreciable
- Property used predominantly outside the United States
- Property used by certain regulated utilities
Why Mobile Home Parks Excel
Mobile home parks have an exceptionally high percentage of 15-year and shorter-lived property:
| Component | Recovery Period | Bonus Eligible |
|---|---|---|
| Roads and paving | 15 years | Yes |
| Water/sewer systems | 15 years | Yes |
| Electrical infrastructure | 15 years | Yes |
| Lot pads and site work | 15 years | Yes |
| Park-owned homes | 7 years | Yes |
| Fencing and gates | 15 years | Yes |
| Signage and lighting | 15 years | Yes |
| Clubhouse building | 27.5 years | No |
Typically 80-100% of a mobile home park's depreciable value qualifies for bonus depreciation.
How This Affects Your Lazy 1031 Strategy
The restoration of 100% bonus depreciation significantly enhances the Lazy 1031 strategy's effectiveness.
Before OBBBA (2024-2025)
With bonus depreciation at 60% in 2024 and 40% in 2025, investors needed to invest more capital or accept partial gains offset:
- A mobile home park with $1 million in bonus-eligible property would generate only $600,000 in Year 1 depreciation (2024) or $400,000 (2025)
- The remaining depreciation would be claimed over 5-15 years under regular schedules
After OBBBA (2026 and Beyond)
With 100% bonus depreciation restored:
- The same $1 million in bonus-eligible property generates the full $1 million depreciation in Year 1
- More efficient capital utilization for gains offsetting
- Smaller investments can offset larger gains
Planning Implications
- Lower investment thresholds: You may need to invest less to fully offset your gains
- More flexibility: Even smaller property sales can benefit from the strategy
- Enhanced syndication returns: Cost segregation delivers maximum Year 1 benefits
Section 179 Changes: The New $2.5 Million Limit
While bonus depreciation gets most of the attention, OBBBA also significantly increased Section 179 expensing limits.
Section 179 vs. Bonus Depreciation
| Feature | Section 179 | Bonus Depreciation |
|---|---|---|
| Dollar limit | $2.5 million | Unlimited |
| Phase-out threshold | $3.5 million | None |
| Taxable income limit | Yes (can't create/increase loss) | No |
| Must be elected | Yes | Automatic (can elect out) |
| Applies to | Tangible personal property | Broader property categories |
When Section 179 Matters
Section 179 is particularly useful for:
- Smaller businesses under the phase-out threshold
- Situations where you want to control the amount of depreciation claimed
- Property types that qualify for 179 but not bonus depreciation
For most Lazy 1031 investors focused on passive syndication investments, bonus depreciation remains the primary tool.
Critical Warning: State Non-Conformity Issues
Important: Not all states follow federal bonus depreciation rules. If you live in a non-conforming state, your state tax calculation will differ from federal.
States That Do NOT Conform to Bonus Depreciation
| State | Status | What This Means |
|---|---|---|
| California | Does not conform | Must use straight-line depreciation for CA taxes |
| New York | Does not conform | Add back bonus depreciation for NY income tax |
| New Jersey | Does not conform | State depreciation calculated separately |
| Michigan | Does not conform for individuals | Complex rules apply |
| Pennsylvania | Partial conformity | Varies by taxpayer type |
| Georgia | Does not conform | State add-back required |
| Connecticut | Does not conform | Separate state calculation needed |
Impact on Lazy 1031 Planning
If you're a California resident using the Lazy 1031 strategy:
Federal Return:
- Claim full 100% bonus depreciation
- Maximize Year 1 tax offset
California Return:
- Add back bonus depreciation
- Claim straight-line depreciation over asset life (5-15 years)
- Year 1 state benefit is reduced
- Future year state benefits are enhanced
The Math Still Works
Even with state non-conformity, the Lazy 1031 strategy remains valuable because:
- Federal rates are typically higher than state capital gains rates
- The total depreciation is the same—just timed differently for state purposes
- You're deferring, not losing the state depreciation benefits
- The 3.8% NIIT is a federal-only tax that bonus depreciation helps offset
Always work with a CPA who understands both federal and your state's specific rules.
Timing Your Investments: Placed in Service Rules
Bonus depreciation is based on when property is "placed in service"—not when it's purchased or when money changes hands.
What "Placed in Service" Means
Property is placed in service when it's:
- Ready and available for its intended use
- Substantially complete
- Available for income production
For Syndication Investors
The placed-in-service date that matters is when the syndication's property is placed in service, not when you write your check:
- Acquiring an existing property: Generally placed in service at closing
- New construction: When the building is ready for occupancy
- Renovations: When improvements are complete and available for use
Year-End Planning Considerations
To use the Lazy 1031 strategy for a 2026 property sale:
- Sell your property any time in 2026
- Invest in a syndication where the property will be placed in service in 2026
- Receive your K-1 showing your share of 2026 depreciation
- File your 2026 return with the passive loss offsetting your passive gain
Timing trap: If you invest in a syndication in December 2026 but the property doesn't close until January 2027, you won't receive 2026 depreciation.
Action Steps for 2026
If you're planning to sell investment property in 2026, here's how to prepare:
Q1-Q2 2026: Planning Phase
- Estimate your expected capital gains and depreciation recapture
- Consult with your CPA about your tax situation
- Begin researching syndication opportunities
- Understand your state's bonus depreciation rules
Q3 2026: Execution Phase
- List your property for sale
- Identify syndication opportunities with 2026 placed-in-service dates
- Verify cost segregation will be performed
- Review syndication documents with your attorney
Q4 2026: Critical Timing
- Close your property sale
- Complete syndication investment (allow processing time)
- Confirm property closing dates
- Gather documentation for tax filing
Tax Filing (2027)
- Receive K-1 from syndication (typically March)
- Work with CPA to calculate passive loss offset
- File federal return with Schedule E
- File state returns with appropriate adjustments (if applicable)
Next Steps
The restoration of 100% bonus depreciation makes 2026 an excellent year to execute a Lazy 1031 strategy. To understand your specific opportunity:
- Calculate your potential savings using our free Lazy 1031 Exchange Calculator
- Review your tax situation with a qualified CPA
- Explore current opportunities by contacting our team
This article is for educational purposes only and does not constitute tax, legal, or investment advice. Tax laws are subject to change. The information regarding OBBBA reflects our understanding as of January 2026. Always consult with qualified tax professionals for advice specific to your situation. State tax laws vary significantly; consult a CPA familiar with your state's treatment of bonus depreciation.