By Gian Gordon-Whyte, CPA, former IRS Agent
Accolade Accounting recommends that real estate investors make four decisions before December 31, 2026: when to place property in service, which hour records to keep, how to structure any late-year sale, and what to pay for the fourth-quarter estimate. Each one affects how much depreciation you can claim in 2026, whether rental losses offset your other income, and whether a 1031 exchange stays on schedule. Bonus depreciation, passive loss limits, QBI thresholds, and Georgia’s rules shape how each decision plays out. If you own several rentals and also earn a high W-2 or 1099 income, these are the choices most likely to change what you owe for 2026.
Want a second set of eyes before December 31? Book a virtual year-end review.
| Date | What it affects |
|---|---|
| December 31, 2026 | Last day to place property in service for 2026 depreciation; last day for hours to count toward 2026 tests |
| January 15, 2027 | Fourth-quarter 2026 estimated tax payment due |
| February 1, 2027 | Filing the 2026 return and paying in full by this date replaces the January 15 payment |
| April 15, 2027 | 2026 return due; can cut a 1031 replacement period short unless the return is extended |
| 45 and 180 days after a sale | 1031 identification and replacement deadlines |
Yes, for qualifying property. The One Big Beautiful Bill Act made the 100% special depreciation allowance permanent for qualified property acquired and placed in service after January 19, 2025, according to the IRS (IR-2026-06 and Notice 2026-11). Bonus depreciation applies only to property with a recovery period of 20 years or less (IRS Publication 946), and recovery periods for rental assets come from IRS Publication 527.
| Rental asset | Recovery period | Eligible for bonus depreciation? |
|---|---|---|
| Residential rental building | 27.5 years | No |
| Appliances, carpets, and furniture | 5 years | Yes |
| Land improvements such as fences, roads, and shrubbery | 15 years | Yes |
The acquisition date also matters: under Notice 2026-11, property bought under a written binding contract is generally treated as acquired when the contract became binding, so a contract signed before January 20, 2025 can leave property under the older, lower percentages. Investors with larger properties often identify these shorter-lived components through a cost segregation review; our guide to multifamily real estate tax benefits covers how that works, and our rental property tax deductions guide shows how bonus depreciation fits alongside other deductions.
A rental is placed in service when it is ready and available for its specific use, even if no tenant has moved in yet (IRS Publication 527). A property that closes on December 20 and is ready to rent by December 31 can start depreciating in 2026; one still under renovation on December 31 generally starts in 2027.
The building uses the mid-month convention, so a building placed in service in December receives half a month of 2026 depreciation. The placed-in-service date has the biggest effect on shorter-lived assets such as appliances, carpets, furniture, and land improvements, which can qualify for the full 100%. If you are deciding whether to finish work before year-end, our article on rental property repairs vs. improvements explains how the IRS treats each.
A large depreciation deduction reduces your taxes only if the resulting loss is usable. Rental activities are generally passive, and passive losses usually offset only passive income (IRS Publication 925). Two exceptions apply: the special $25,000 allowance for investors who actively participate, which phases out at higher incomes, and real estate professional status, which lets investors who qualify and materially participate treat rental losses as nonpassive.
Nonpassive losses still have a 2026 ceiling. The excess business loss limit applies to net business losses above $256,000, or $512,000 for joint returns (Rev. Proc. 2025-32); the excess carries over as a net operating loss (Instructions for Form 461). Passive losses you cannot use are suspended and carried forward. Confirm how much of the loss you can use in 2026 before claiming additional depreciation.
Track hours for three separate tests: real estate professional status, material participation, and the QBI rental real estate safe harbor. Meeting one does not mean you meet the others. Hours worked in 2026 count only for 2026, so keep the records as the hours are worked.
| Test | Hour requirement | What it affects | Records |
|---|---|---|---|
| Real estate professional status | More than 750 hours in real property trades or businesses in which you materially participate, and more than half of all your personal services in all trades or businesses for the year performed in those real property businesses. On a joint return, your spouse's personal services do not count toward these tests | Rental losses can be treated as nonpassive | Hour records for all work in real property businesses and all other work; Publication 925 does not list a specific record format for this test |
| Material participation | Several tests apply; your spouse's participation counts toward yours for material participation only | Required for each rental activity to be nonpassive under real estate professional status | Any reasonable method (Publication 925) |
| QBI rental real estate safe harbor | 250 or more hours of rental services per year (enterprises in existence four or more years can meet it in 3 of the last 5 years) | Rental income can be treated as a trade or business for the Section 199A deduction | Contemporaneous records of hours, services performed, dates, and who performed them, plus separate books and records (Rev. Proc. 2019-38) |
For details on qualifying rental services, see our guide to the rental real estate safe harbor for QBI. Our real estate professional tax guide covers the 750-hour test in more depth.
In a 1031 exchange, you have 45 days after transferring your property to identify replacement property in writing, and you must receive it by the earlier of 180 days or the due date of your tax return for that year, including extensions (Instructions for Form 8824). For a property sold after mid-October 2026, the April 15, 2027 due date can arrive before day 180. Filing an extension on the 2026 return can preserve the full 180-day replacement period when the unextended deadline would otherwise arrive first, so make this decision at the time of the sale.
If you sell outright instead, suspended passive losses from that property are generally allowed in full when you dispose of your entire interest in a fully taxable transaction (IRS Publication 925). Our article on why two real estate investors can owe very different taxes explains how sale timing changes the result.
The One Big Beautiful Bill Act made the Section 199A deduction of up to 20% of qualified business income permanent. For 2026, the income-based limitations begin at $201,750 of taxable income for single filers and $403,500 for joint filers (Rev. Proc. 2025-32, section 4.26).
| 2026 QBI rule | Single filers | Married filing jointly |
|---|---|---|
| Income-based limitations begin (taxable income before the QBI deduction) | $201,750 | $403,500 |
| Limitations fully phased in | $276,750 | $553,500 |
| New minimum deduction (with at least $1,000 of QBI from businesses in which you materially participate) | $400 | $400 |
The minimum deduction is new for tax years beginning after 2025, and the IRS will adjust it for inflation (IRS). For rental owners, it depends on the same material participation rules that apply to real estate professional status. Investors near the thresholds can review the timing of income and deductions before year-end.
Fourth-quarter 2026 estimated tax is due January 15, 2027 (2026 Form 1040-ES), and a late-year sale, a large depreciation deduction, or a change in rental income can change what you owe. To base payments on last year’s tax and avoid an underpayment penalty, taxpayers whose 2025 adjusted gross income was more than $150,000 generally need to pay 110% of their 2025 tax. You can skip the January 15 payment if you file your 2026 return and pay the full balance by February 1, 2027.
No. Georgia does not follow federal bonus depreciation under Section 168(k). The Georgia Department of Revenue lists these bonus depreciation rules among the federal provisions Georgia has not adopted. If you claim bonus depreciation on your federal return, you generally need a separate depreciation calculation for Georgia, which can change your state taxable income. Review both calculations before estimating your year-end tax payments.
A year-end review with Accolade Accounting before December 31 can confirm how much depreciation you can use in 2026, whether your hour records support the treatment you plan to claim, whether a pending sale creates a 1031 timing problem, and what to pay on January 15. We meet with clients by video or phone. Learn more about our real estate tax accounting services or book a virtual appointment.
Tax disclaimer: This article provides general information for tax year 2026 and is not tax advice. Tax rules change, and your situation may differ. Consult a qualified tax professional before acting.
Disclaimer: This article is for informational purposes only and is not intended as tax advice. Tax situations vary, and IRS rules can change. Always consult with a qualified tax professional regarding your specific circumstances.
