If you own investment property in Houston or anywhere in Texas, 2026 brings some of the most significant tax law changes in years. The One Big Beautiful Bill Act (OBBBA) signed into law has restored and expanded several provisions that directly impact real estate investors. Here is what you need to know to maximize your tax savings this year.
100% Bonus Depreciation Is Back
One of the biggest wins for real estate investors in 2026 is the restoration of 100% bonus depreciation. After years of phase-downs that reduced the deduction to 80%, 60%, and 40%, the OBBBA has brought back the full first-year write-off for qualified property. The date matters: the 100% deduction applies to qualified property acquired after January 19, 2025, and it is permanent. Property acquired on or before that date stays on the old phase-down schedule, which was 40% for 2025.
Source: IRS Notice 2026-11 (IR-2026-06, January 14, 2026), Treasury and IRS guidance on the additional first year depreciation deduction.
This means if you purchase a rental property, complete a renovation, or acquire new equipment for your real estate business in 2026, you can deduct the entire cost of qualifying assets in the year they are placed in service. For Houston investors managing multiple properties, this can translate to tens or even hundreds of thousands of dollars in immediate tax savings.
Section 179 Expensing Increases
The Section 179 deduction limit has also been increased, to $2,560,000 for tax years beginning in 2026, phasing down once you place more than $4,090,000 of Section 179 property in service. That lets allowing small business owners and real estate investors to expense more qualifying more qualifying property upfront. Unlike bonus depreciation, Section 179 has always been popular because it lets you choose exactly which assets to expense.
The new higher limits mean you can write off more of your capital improvements, HVAC systems, roofing, fire protection, and security systems in the year of purchase rather than depreciating them over decades.
Qualified Opportunity Zones 2.0 Made Permanent
Houston has several designated Qualified Opportunity Zones, particularly in areas like Third Ward, Fifth Ward, and parts of the East End. The OBBBA has made the QOZ program permanent and expanded it with what is being called QOZ 2.0.
Investors who place capital gains into Qualified Opportunity Funds can now benefit from enhanced tax deferral and, if held long enough, complete exclusion of gains on the new investment. For Houston real estate investors already eyeing up-and-coming neighborhoods, this represents a powerful tool to defer and potentially eliminate capital gains taxes while investing in communities that need development.
The SALT Deduction Cap Goes to $40,400
The state and local tax deduction cap, which was set at $10,000 since 2017, was raised to $40,000 for 2025 and is $40,400 for 2026 ($20,200 married filing separately). It phases down above $505,000 of modified AGI but never below $10,000. While Texas does not have a state income tax, this change still matters for Houston property owners.
Property taxes in Harris County and surrounding areas like Fort Bend, Montgomery, and Brazoria counties are among the highest in the nation. With the higher SALT cap, more of your property tax payments become deductible on your federal return. For investors with multiple properties, this could mean thousands of additional dollars in deductions that were previously lost.
The Texas Advantage for Real Estate Investors
Texas remains one of the most tax-friendly states for real estate investment. With no state income tax, your rental income, capital gains, and business profits are only taxed at the federal level. When you combine this with the restored bonus depreciation, higher Section 179 limits, expanded QOZ benefits, and the increased SALT cap, Houston real estate investors are in a uniquely advantageous position in 2026.
The key is having a CPA who understands these provisions and can build a tax strategy that takes full advantage of every available deduction.
What You Should Do Now
Do not wait until year-end to plan for these changes. The most effective tax strategies for real estate investors require advance planning. Review your current portfolio and identify properties that may benefit from cost segregation studies. Evaluate whether any planned acquisitions or renovations should be accelerated to take advantage of 100% bonus depreciation. Check if any of your properties are in or near Qualified Opportunity Zones. Finally, make sure your bookkeeping is current so your CPA can model different scenarios and find the optimal strategy for your situation.
At Whetzel CPA, we specialize in tax planning and accounting for Houston real estate investors. Whether you own a single rental property or manage a large portfolio, we can help you navigate these 2026 tax changes and build a strategy that minimizes your tax liability. Call us today at (832) 594-0339 or schedule your free consultation.
Common questions
Is 100% bonus depreciation really permanent this time?
Yes, with one condition attached. The 100% deduction applies to qualified property acquired after January 19, 2025, and there is no expiration date on it. The old requirement that property be placed in service before January 1, 2027 was repealed for that property. Anything acquired on or before January 19, 2025 is still on the old phase-down, at 20% for 2026.
How much can I expense under Section 179 in 2026?
Two million five hundred sixty thousand dollars for tax years beginning in 2026. The limit is reduced dollar for dollar once you place more than $4,090,000 of Section 179 property in service, and both figures are indexed for inflation. Section 179 still matters even with bonus back at 100%, because it reaches improvements to nonresidential real property that bonus does not, including roofs, HVAC, fire protection, and security systems.
What is the SALT deduction cap for 2026?
Forty thousand four hundred dollars, or $20,200 if you file married separately. It phases down for modified adjusted gross income above $505,000, but it never drops below $10,000. This matters more in Texas than the headline suggests. Texans have no state income tax to deduct, so the old $10,000 cap was often used up by property tax alone. At $40,400 most Houston property tax bills now fit under the cap with room left over.
Do Opportunity Zones still make sense for a Houston investor?
For gains that are not real estate, often yes. The program is permanent now, and the ten-year exclusion on appreciation in the fund is the part that carries the weight. For a real estate gain you are usually still better off with a 1031 exchange, because you get full deferral and a stepped-up basis at death. Opportunity Zones are the stronger tool when the gain came from stock or a business sale and you want to move it into real estate.
I own three rentals in Houston. What should I actually do about all this?
Three things, in order. Look at whether a cost segregation study makes sense on any property acquired after January 19, 2025, because at 100% bonus a study is worth roughly five times what it was under the 20% schedule. Check whether the higher SALT cap puts you back into itemizing. Then get your books current, because none of the modeling works on stale numbers.