2025 Returns Are Filed. What Can Real Estate Investors Expect for 2026?
For many real estate investors, the weeks right after tax season are the best time to step back and think about strategy. You’ve just reviewed last year’s numbers, seen where profit was made, where it was lost, and where the tax treatment may have been working for you — or against you. And with the One Big Beautiful Bill now signed into law on July 4, 2025, there are meaningful changes that could affect how 2026 deals are structured.
For Wisconsin real estate investors, the question isn’t just what changed — it’s how those changes should shape your next move.
What to Keep in Mind as You Plan the Rest of Your 2026 Projects
Bonus Depreciation Is Back at 100% — But How Does it Work?
One of the most significant changes in the new law is the permanent restoration of 100% bonus depreciation for qualifying property placed in service after January 19, 2025. For real estate investors, this is a genuine opportunity — with one important caveat.
The building structure itself is not eligible for bonus depreciation. Residential rental property still depreciates over 27.5 years. What bonus depreciation applies to are the shorter-lived components inside a property: appliances, flooring, fixtures, HVAC equipment, certain land improvements, and other personal property identified through a cost segregation study. These items are typically classified as 5, 7, or 15-year property, and under the new law, they can be fully expensed in the year they're placed in service.
For buy-and-hold investors, this significantly changes the math on cost segregation. A study that was borderline worthwhile before is now clearly worth the investment for most income-producing properties. If you've added rental properties to your portfolio recently and haven't done a cost segregation analysis, that conversation with your CPA should happen before year-end.
For fix-and-flip investors, bonus depreciation does not apply to properties held primarily for sale. Renovation costs are capitalized into your cost basis and reduce taxable profit at closing — which has always been the case. That structure hasn't changed.
The QBI Deduction Is Now Permanent
The 20% Qualified Business Income deduction, originally set to expire after 2025, is now permanent. For real estate investors operating through pass-through entities — LLCs, S-corporations, partnerships — this means up to 20% of qualifying business income can be deducted from taxable income.
Income thresholds apply. Some filers will receive the full deduction. Above those thresholds, W-2 wages paid and unadjusted property basis become factors in the calculation. The law also adds a $400 minimum QBI deduction for taxpayers with at least $1,000 in qualified business income who materially participate in the business — a modest but noteworthy addition for investors with smaller operations. Overall, income and entity structure determine how much of the deduction you can claim, so always work through this with your CPA.
The deduction being permanent now makes multi-year planning more straightforward. If you're earning income through a pass-through entity and haven't structured your ownership to maximize the QBI benefit, this is worth a conversation with your tax advisor before your next deal closes.
What Hasn't Changed for Flippers
With so much coverage of the new law, it's worth being clear about what's unchanged for active fix-and-flip investors. Renovation materials, contractor labor, permit fees, and project costs are not immediately deductible — they're capitalized into your cost basis and reduce taxable profit when the property sells. That treatment for dealer inventory remains the same.
What you can still deduct in the year incurred:
Loan interest on hard money or private money loans during the project
Property taxes during the hold period
Insurance premiums
Utilities during rehab
Realtor commissions and closing costs at sale
Professional fees — legal, CPA, consulting
These expenses generally reduce taxable income in the year incurred, subject to your accounting method and the classification of the costs. Keeping clean records throughout the project (not reconstructing them at tax time!) will protect those deductions if they're ever questioned and ensure your CPA can account for them correctly, saving you the most.
The Bigger Picture
The new law rewards investors who plan ahead and coordinate with their CPA before making acquisition or financing decisions. Buy-and-hold investors should review recent acquisitions for cost segregation opportunities, while pass-through investors should evaluate how the permanent QBI deduction may affect their long-term tax strategy.
For flippers, the structural tax treatment is largely unchanged. The edge still comes from execution: accurate ARV, disciplined timelines, and financing structured so that interest costs and project records are clean and supportable.
These provisions still come with thresholds, limitations, and entity-structure considerations, so the right move is to review them with a qualified CPA before making decisions. If you want to talk through how the financing side of your next deal is structured and whether your documentation supports your tax position, I’m happy to take a look.
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Legal Disclaimer:
This article is provided for informational and educational purposes only and is not intended to constitute legal advice. Real estate regulations can be complex and situation-specific. Readers should consult with qualified legal counsel or a licensed attorney for guidance regarding their particular transaction or compliance obligations.
At MGM Private Capital, we actively support real estate investors across Southeastern Wisconsin with trusted capital options and offer opportunities for capital partners to grow alongside us.