Taxation on Real Estate Conference - Virtual-1 - Updated

1 - Updated - Whats-New-in-Real-Estate-Taxation

Pdf Summary

This document is a general tax update focused on real estate taxation and recent federal and state changes affecting depreciation, interest limitations, credits, and partnership audits.<br /><br />Key depreciation changes include the restoration of 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025, under OBBBA. Qualified property includes assets with a MACRS recovery period of 20 years or less, certain software, water utility property, fruit/nut plants, qualified production property, and certain qualified improvement property (QIP). QIP generally covers interior improvements to nonresidential buildings, while structural changes, land improvements, and residential rental property are excluded. Section 179 expensing was also increased for 2025 and 2026.<br /><br />The presentation also covers state conformity, noting Illinois decouples from federal bonus depreciation beginning in 2026, while Indiana partially conforms and Wisconsin does not.<br /><br />For Section 163(j), the business interest limitation threshold is based on average annual gross receipts, rising from $31 million in 2025 to $32 million in 2026. OBBBA also changed adjusted taxable income calculations back to an EBITDA-style measure, increasing allowable interest deductions. The rules for interest capitalization were tightened beginning in 2026.<br /><br />The document reviews passive activity and real estate professional rules, including the 750-hour and more-than-half-personal-services tests, material participation standards, and grouping elections. It also discusses elections related to property taxes, recurring items, and de minimis safe harbor treatment.<br /><br />Energy and sustainability incentives include Section 179D deductions, the 45L credit, and elective pay for certain clean energy credits. Opportunity Zones, Low-Income Housing Tax Credits, and New Markets Tax Credit updates are also highlighted.<br /><br />Finally, the presentation explains 1031 exchanges and provides an overview of the centralized partnership audit regime (CPAR), including partnership representative rules, imputed underpayments, and pushout procedures.

Keywords

real estate taxation

bonus depreciation

Section 179 expensing

interest limitation

Section 163(j)

qualified improvement property

state tax conformity

passive activity rules

energy tax credits

partnership audit regime