100% Bonus Depreciation Is Permanent Again, With a New Catch for Oregon Owners [8/19/26]
August 19, 2026
Gregory Frick

100% Bonus Depreciation Is Permanent Again, With a New Catch for Oregon Owners [8/19/26]

Federal bonus depreciation is back at 100%, and this time it is permanent. For apartment owners, that restores one of the most powerful tax tools in real estate. Accessing it takes a cost segregation study, and in Oregon, some new recordkeeping.

Josh Caddel, senior tax manager at Aprio, walked through the rules in an interview with HFO Investment Real Estate partner Greg Frick. They discussed these in HFO’s Multifamily Marketwatch® video series.

Depreciation Explained

Apartment buildings depreciate over 27.5 years for federal tax purposes. Bonus depreciation applies only to assets with a tax life of 20 years or less, which is where the cost segregation study comes in. An engineer reviews the property and identifies components that qualify for shorter lives: appliances at five years, parking lots and landscaping at 15. “They’ll break that out component by component, and then you can depreciate it faster,” Caddel said.

Under the 2025 federal tax law change, those short-life assets qualify for a 100 percent write-off in the year the property is placed in service. The rate is permanent going forward unless Congress changes the law.

The numbers add up quickly. On a $3 million acquisition with 20 percent allocated to land, $2.4 million remains to depreciate. A study on an average apartment complex can move 25 to 35 percent of the building basis into 5-year and 15-year assets. At 30 percent, that means $720,000 is eligible for immediate deduction.

Longtime owners are not shut out. A study can be performed on a look-back basis, comparing the depreciation taken so far with what the owner would have been entitled to. The difference is caught up on the current return by filing IRS Form 3115. No amended returns are required.

Strategic Implementation

The strategy is not for everyone. Caddel said it can be ineffective for owners who lack the income to use the accelerated losses. He also said this can be an issue for those who plan to sell within the next year or two.

When it comes to utilizing these accelerated deductions, there are a few hurdles a taxpayer needs to clear. Passive loss rules are the most common obstacle. Rental real estate is passive by default, which limits how passive losses offset other income. Real estate professional status, which requires 750 hours a year in a real estate business and more than half of total working time, can remove the default passive status and open the losses up to possibly offset nonpassive income. For married couples filing jointly, one spouse can qualify alone and both benefit.

Recapture is the other side of the ledger. Depreciation lowers basis, so the gain at sale grows by the deductions taken. In addition, the accelerated depreciation claimed previously can shift what would normally be capital gain into ordinary income. The idea here is to accelerate depreciation into the early years where owners can use the deductions. Then, proactively plan for the exit, including through a possible deferral of the gain through a 1031 exchange.

The state picture has gotten more complicated. Oregon decoupled from federal depreciation rules starting in 2026 and does not allow bonus depreciation. Owners still get the 5-year and 15-year acceleration identified in a study; they just cannot take it all in year one for Oregon. The result is two depreciation schedules and, at sale, potentially two different gains.

Implementation in Washington State

Washington has no state income tax today, but an income tax on households with taxable income above $1 million is scheduled to arrive in 2028 and is being challenged in court. The state’s capital gains tax currently excludes real estate sales.

Caddel sees two recurring mistakes: owners who assume the strategy does not apply to them and miss out on the opportunities, and owners who accelerate quickly without planning the exit. “In both cases, it’s not having a tax advisor who knows your situation and knows real estate,” he said. For estate planners, one piece of good news: the stepped-up basis at death still applies as it would otherwise.

HFO Investment Real Estate is the largest multifamily-only brokerage in the Pacific Northwest, with 12 brokers focused exclusively on apartment investment sales in Oregon and Washington. Call (503) 241-5541

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