Federal Tax Overhaul Makes 100% Bonus Depreciation Permanent and Raises SALT Cap to $40,000

The expiration of the 2017 Tax Cuts and Jobs Act (TCJA) created a looming cliff for American real estate. Instead of falling over it, Congress has passed a sweeping 2026 tax overhaul that delivers two massive, long-sought victories for the housing and commercial property sectors.[1][4]

The most immediate consumer-facing change is the quadrupling of the State and Local Tax (SALT) deduction cap. Since 2017, homeowners have been limited to deducting just $10,000 of their property and state income taxes—a severe penalty for residents of high-tax states like New York, California, and New Jersey.[2]

Under the new legislation, that cap jumps to $40,000 for married couples filing jointly. The National Association of Realtors projects this will immediately lower the effective tax burden for roughly 15 million American households, potentially unfreezing housing inventory in premium coastal markets where owners previously felt trapped by high carrying costs.[1]

However, fiscal analysts note that the benefits are highly concentrated. The Congressional Budget Office estimates that the vast majority of the SALT relief will flow to households earning over $200,000 annually, raising questions about its impact on entry-level housing affordability.[3]

While homeowners celebrate the SALT adjustment, commercial real estate investors and syndicators are securing a permanent structural advantage: the enshrinement of 100% bonus depreciation.[1]

Previously, the 100% immediate write-off for qualified property—such as appliances, flooring, and land improvements—began phasing out in 2023, dropping to 20% by 2026. The new law reverses this phase-out entirely, making the 100% rate a permanent fixture of the tax code.[4]

This means an investor purchasing a multifamily apartment complex can use cost segregation studies to identify assets with 5-, 7-, or 15-year lifespans and deduct their entire value in year one. The Tax Foundation argues this permanent expensing removes a major penalty on capital investment, incentivizing developers to upgrade aging housing stock rather than deferring maintenance.

For syndicators, this creates massive paper losses that can offset active income for real estate professionals, dramatically boosting the internal rate of return (IRR) on value-add projects. Academic models suggest this immediate liquidity allows developers to reinvest capital into secondary projects up to 18 months faster than under straight-line depreciation.[1]

The dual provisions do not come cheap. The CBO projects that making bonus depreciation permanent and raising the SALT cap will add hundreds of billions to the federal deficit over the next decade.[3]

Lawmakers argue the deficit impact will be partially offset by increased economic velocity. By allowing businesses to immediately recover the cost of investments, the policy theoretically spurs job creation in the construction, manufacturing, and local service sectors.[4]

Real estate investment trusts (REITs) and homebuilder stocks surged on the news, reflecting Wall Street's consensus that the overhaul lowers the cost of capital and increases net operating income across portfolios.[2]

Tax advisors are already rewriting 2026 playbooks. For homeowners, the $40,000 SALT cap means itemizing deductions will once again make sense for millions who had defaulted to the standard deduction since 2018.

For investors, the permanence of bonus depreciation removes the "ticking clock" that previously forced rushed acquisitions at the end of calendar years to capture expiring tax benefits, allowing for more disciplined underwriting.[4]

Ultimately, the 2026 tax overhaul re-establishes real estate as the most tax-advantaged asset class in the American economy. By simultaneously lowering the carrying costs of primary residences and turbocharging the ROI of investment properties, the legislation sets the stage for a highly active, capital-intensive housing market in the years ahead.[4]