2026 Tax Changes for Landlords: What the One Big Beautiful Bill Act Means for Your Rental

The One Big Beautiful Bill Act (OBBBA), signed in July 2025, is the biggest federal tax law since 2017, and 2026 is the first full tax year most of its provisions apply. The coverage has been dominated by headline items that have nothing to do with rentals. Buried in the same law is a set of changes that genuinely move the numbers for rental property owners, mostly by taking provisions that were scheduled to die and making them permanent.

Here is the landlord's version: what changed, what it is worth, and what stayed exactly the same. As always for Vancouver owners, Washington's lack of a state income tax (a real advantage we have covered before) means the federal rules below are essentially the whole conversation.

1. 100% Bonus Depreciation Is Back, and This Time It's Permanent

The headline change for real estate. Bonus depreciation, the rule that lets you deduct qualifying assets with recovery periods of 20 years or less entirely in year one, had been phasing out: 80% in 2023, 60% in 2024, on its way to zero. The OBBBA restored the rate to 100% and removed the sunset entirely for qualifying property acquired and placed in service after January 19, 2025. Property placed in service before that keeps the rate that applied at the time.

For a rental owner this touches three things:

• In-unit assets: appliances, carpet, window coverings, and similar 5-year property purchased for the rental can be fully expensed in the year placed in service.
• Land improvements: a new fence, driveway, or major landscaping (15-year property) likewise qualifies.
• Cost segregation: the big one. A study that carves 15% to 30% of a building's cost into those shorter-lived buckets now produces a fully deductible year-one amount on new purchases. We walk through realistic single-family numbers in our cost segregation guide.

One discipline worth keeping: bonus depreciation changes when you deduct, not whether. The building still depreciates over 27.5 years as explained in our depreciation guide, recapture still waits at sale, and any loss the deduction creates still has to get past the passive activity rules before it saves you a dollar this year.

2. The QBI Deduction Survived and Got Slightly Friendlier

The Section 199A qualified business income deduction, worth up to 20% of qualifying rental profit, was scheduled to expire after 2025. The OBBBA made it permanent and adjusted the dials:

• 2026 thresholds: the income levels where limitations start are $201,750 for single filers and $403,500 for married filing jointly.
• Wider phase-in ranges: the band over which the wage-and-property limits phase in grew to $75,000 (single) and $150,000 (joint), which softens the cliff for incomes just above the thresholds.
• A new $400 floor: taxpayers with at least $1,000 of QBI from businesses they materially participate in get a minimum $400 deduction, indexed going forward.

For landlords the real question was never the percentage; it is whether a rental counts as a "qualified trade or business" at all. That analysis (including the 250-hour safe harbor) did not change, and we cover it in depth in our QBI guide for rental owners. The short version: profitable rentals that are run like a business can knock 20% off the taxable rental profit, permanently.

Most of what the 2025 law did for landlords was remove expiration dates. Bonus depreciation, QBI, and the estate exemption were all scheduled to shrink or vanish; now they are fixtures you can actually plan a decade around.

3. The 1099 Threshold Jumps from $600 to $2,000

A quiet change that saves real paperwork. Since the 1950s, businesses (including landlords whose rental activity rises to a trade or business) have had to issue Forms 1099-NEC or 1099-MISC to unincorporated vendors paid $600 or more in a year. For payments made after December 31, 2025, the threshold rises to $2,000, indexed for inflation from 2027.

In practice: the $1,200 you paid a handyman across 2026 no longer triggers a federal filing; the $4,500 you paid your landscaper still does. Remember the threshold is per payee per year, not per invoice, and payments for 2025 still follow the $600 rule this coming January. (Owners whose vendors are paid through our accounting never deal with this at all; vendor payments and year-end reporting ride along with the monthly owner statements.)

4. The Excess Business Loss Limit Is Permanent (and Lower Than You'd Guess)

Section 461(l) caps how much net business loss a non-corporate taxpayer can deduct against non-business income in one year; the excess rolls forward as a net operating loss. The OBBBA made the limitation permanent and reset its inflation base, which actually produced lower 2026 thresholds than 2025: $256,000 for single filers and $512,000 for joint filers.

Most owners of a rental or two will never touch this ceiling, especially since passive losses get stopped earlier by the passive activity rules. Where it bites is the aggressive end: a real estate professional stacking several cost segregation studies in a single year can generate losses big enough to hit the cap. If that describes your year, your CPA should be modeling it before December, not discovering it in April.

5. Estate Planning: $15 Million Exemption, Step-Up Intact

From 2026 the federal estate and gift tax exemption is $15 million per person ($30 million per married couple), permanent and indexed from 2027. The previously scheduled drop to roughly half that is gone. Just as important for rental owners: the stepped-up basis at death survived untouched. Heirs still inherit property at its date-of-death value, which erases a lifetime of deferred depreciation recapture and appreciation gain.

Together those two facts are the legal foundation of the long-game strategy many landlords quietly run: hold, refinance, exchange, and let the step-up settle the tab. We lay that out in our guide to the never-sell rental strategy, and the mechanics of inherited rentals specifically in our inherited property guide.

6. The SALT Cap: Mostly a Non-Event for Your Rentals

The law's most argued-over provision, the state and local tax deduction cap rising from $10,000 to $40,000 (about $40,400 for 2026, phasing back toward $10,000 above roughly half a million dollars of income, and scheduled to revert in 2030), matters less to landlords than the headlines suggest, for a happy reason: property taxes on a rental were never subject to the SALT cap. They are a business expense, deducted in full on Schedule E, cap or no cap. The higher cap only affects the taxes you itemize personally, like your own residence's property tax. Washington owners with no state income tax to deduct feel this change less than almost anyone in the country.

What Didn't Change (and Why That's the Strategy)

None of the pillars moved. For a Vancouver rental owner filing the 2026 return, all of this works exactly as it did:

• 27.5-year residential depreciation, land excluded, mid-month convention and all.
• The passive activity loss rules, including the $25,000 allowance and its never-indexed $100,000 to $150,000 phase-out.
• 1031 exchanges, which were rumored for restriction and emerged untouched.
• Depreciation recapture and the capital gains rate structure at sale, covered in our selling guide.
• Washington's landscape: no state income tax on your rental profit, and the state's capital gains excise tax continues to exempt real estate. The state's own quirks, like REET when you sell and the narrow cases where B&O applies, are unchanged; see our Washington landlord tax guide.

Permanence is itself the planning opportunity. From 2018 to 2025, serious rental tax strategy came with an asterisk: "assuming Congress extends it." For now, the asterisk is gone, and multi-year moves like staging purchases around cost segregation, structuring for QBI, and estate sequencing can be modeled on rules with no expiration date. (Tax law is only ever as permanent as the next Congress, which is one more reason the annual check-in with your CPA stays on the calendar.)

Frequently Asked Questions

What is the biggest OBBBA change for rental property owners?

Permanent 100% bonus depreciation. For qualifying property acquired and placed in service after January 19, 2025, components with a recovery period of 20 years or less (appliances, flooring, land improvements, and everything a cost segregation study reclassifies) can be deducted entirely in year one, and the old phase-down schedule is gone. The building itself still depreciates over 27.5 years, and the losses bonus depreciation creates are still subject to the passive activity rules, so the headline benefit depends on your ability to use the loss.

Did the QBI deduction go away in 2026?

No, the opposite. The 20% qualified business income deduction was scheduled to expire after 2025, and the OBBBA made it permanent. For 2026 the income threshold where limits begin is $201,750 for single filers and $403,500 for joint filers, the phase-in ranges above those thresholds were widened to $75,000 and $150,000, and a new $400 minimum deduction applies for taxpayers with at least $1,000 of qualified business income from a business in which they materially participate. Rentals qualify when they rise to the level of a trade or business or meet the 250-hour safe harbor.

What is the new 1099 threshold for landlords in 2026?

For payments made in 2026 and later, the reporting threshold for Forms 1099-NEC and 1099-MISC rises from $600 to $2,000 per payee per year, with inflation indexing starting in 2027. A landlord who pays an unincorporated handyman $1,500 across 2026 no longer has a federal filing obligation for that payee; pay the same person $2,000 or more and a 1099 is still required. Payments made in 2025 still follow the old $600 threshold, and payments to attorneys keep their own rules.

Does the higher SALT cap help rental property owners?

Mostly no, and that is good news. Property taxes on a rental are a business expense deducted in full on Schedule E; they have never been subject to the SALT cap. The cap only limits the itemized deduction for taxes on your personal return, like your own home's property tax. The OBBBA raised that cap to $40,000 for 2025 (about $40,400 in 2026, with the benefit phasing down above roughly $500,000 of income), which can help Washington homeowners personally, but your rental's property tax deduction never depended on it.

What did NOT change for landlords under the OBBBA?

The core architecture of rental taxation is intact: residential buildings still depreciate over 27.5 years, the passive activity loss rules and the $25,000 allowance with its $100,000 to $150,000 phase-out are unchanged, 1031 exchanges survived intact, depreciation recapture at sale still applies, and the stepped-up basis at death remains. The capital gains rate structure also stayed where it was. Most of what the law did for landlords was make existing favorable provisions permanent rather than create new ones.

This article summarizes federal tax law changes as understood in October 2026 and is general education, not tax, legal, or financial advice. Dollar thresholds shown are for tax year 2026 and most are inflation-indexed, so they will drift in later years, and Congress can change any of this. Confirm current figures and how the rules apply to your situation with a licensed CPA or tax professional.

Written by Avenir Gedarevich, Washington State Designated Broker (WA Managing Broker License #24033559) at VPMG Property Management in Vancouver, WA.