Real Estate Tax Calc
What changed
Treasury and the IRS released the initial 2026-2027 Priority Guidance Plan on September 29, 2026. The plan lists 121 guidance projects for the plan year running October 1, 2026 through September 30, 2027 — the first Priority Guidance Plan to align with the federal fiscal year rather than the prior July-to-June cycle. Projects may be added throughout the year as priorities evolve. The plan is available at irs.gov.
The overarching theme is implementing the One Big Beautiful Bill Act (OBBBA, P.L. 119-21, signed July 4, 2025), the law that permanently restored 100% bonus depreciation, raised the Section 199A pass-through deduction, and made other changes affecting real estate investors. Two items in the plan are directly relevant: proposed regulations under § 168(k) (the permanent additional first-year depreciation allowance) and proposed regulations under § 168(n) (the new qualified production property deduction). Both will formalize interim guidance the IRS issued earlier in 2026.
Why it matters to investors
Permanent 100% bonus depreciation (§ 168(k)) — formal rules are coming: The OBBBA permanently restored the 100% additional first-year depreciation deduction for qualifying property acquired and placed in service after January 19, 2025. IRS Notice 2026-11 (January 14, 2026) provided interim guidance and authorized taxpayers to rely on the existing TCJA-era regulation (Treas. Reg. § 1.168(k)-2) with updated effective dates and percentages. The 2026-2027 Priority Guidance Plan confirms Treasury will now formalize these rules through a notice-and-comment rulemaking. Multiple accounting firms (EY, PwC, BDO) summarize Notice 2026-11 as signaling proposed regulations that will largely carry over the current regulatory framework. Until those proposed regulations appear in the Federal Register, Notice 2026-11 continues to govern; taxpayers can rely on it for property placed in service before the proposed regulations are published, provided they follow the notice in its entirety.
The § 163(j) election and its depreciation cost: The plan highlights a trade-off that applies to leveraged real estate. A real property trade or business that elects out of the Section 163(j) interest-deduction limitation must use the Alternative Depreciation System (ADS) under § 168(g) for residential rental property (40-year), nonresidential real property (40-year), and qualified improvement property (20-year). ADS property does not qualify for bonus depreciation. Investors who elected out of § 163(j) to preserve full interest deductions give up access to 100% bonus depreciation on those asset classes in return. Modeling this trade-off before year-end is worthwhile for highly leveraged portfolios.
Qualified production property (§ 168(n)) — industrial and owner-user commercial investors: The OBBBA added a new 100% expensing provision for nonresidential real property a taxpayer uses directly in a qualified production activity (manufacturing, refining, and similar uses), with property placed in service before January 1, 2031. IRS Notice 2026-16 (February 2026) provided interim guidance. The proposed § 168(n) regulations will clarify who qualifies as the “taxpayer” (passive landlords generally do not, unless the lessee is under common control per the notice), how mixed-use buildings are treated, and the election mechanics. Investors in industrial or owner-user commercial real estate should monitor this guidance closely.
1031 exchanges: Section 1031 like-kind exchanges are not among the 121 listed projects in available summaries of the plan, signaling that no IRS-initiated regulatory changes to the core exchange rules — the 45-day identification period, 180-day closing deadline, qualified intermediary requirement, and real-property-only limitation — are on the immediate agenda. Source: IRS/Treasury 2026-2027 Priority Guidance Plan, September 29, 2026; IRS Notice 2026-11, January 14, 2026; secondary analysis from EY Tax News and PwC.
What to do
2026 acquisitions: Bonus depreciation at 100% is in effect now under Notice 2026-11. A cost segregation study identifies the personal-property components and land improvements that qualify for immediate first-year expensing on properties placed in service in 2026. There is no reason to wait for the proposed § 168(k) regulations before acting.
Highly leveraged properties: If your real estate operation has made or is considering a § 163(j) election to deduct full interest expense, compare the tax value of full interest deductibility against the loss of bonus depreciation on the ADS-required property classes. Model this with a CPA before year-end.
Industrial or owner-user commercial deals: Track the forthcoming § 168(n) proposed regulations for final clarity on lessor rules and mixed-use treatment. Interim Notice 2026-16 is available and can be relied on now for deals structured under that framework.
Educational context only — not tax advice. Primary sources: IRS 2026-2027 Priority Guidance Plan (September 29, 2026); IRS Notice 2026-11 (January 14, 2026); IRS Notice 2026-16 (February 2026). Consult a qualified tax professional before making investment or tax decisions.
Frequently asked questions
Does the 2026-2027 Priority Guidance Plan change the current bonus depreciation rules?
No. The plan signals that proposed regulations formalizing the permanent 100% bonus depreciation rules are on the IRS agenda. Until those proposed regulations appear in the Federal Register, IRS Notice 2026-11 continues to apply, allowing 100% first-year depreciation on qualifying property acquired and placed in service after January 19, 2025. Taxpayers can rely on Notice 2026-11 for property placed in service before the proposed regulations are published, provided they follow the notice in its entirety.
Are 1031 exchange rules in the IRS 2026-2027 guidance plan?
Based on available summaries of the plan, Section 1031 like-kind exchanges are not among the 121 listed projects. That signals no IRS-initiated regulatory changes to the core exchange rules are expected in the near term. Investors should continue following the standard 45-day identification and 180-day closing deadlines and use a qualified intermediary as usual.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.