Is 100% Bonus Depreciation Back for Apartment Syndications?
Yes. Public Law 119-21, signed on July 4, 2025, restored 100% bonus depreciation and made it permanent for qualified property acquired after January 19, 2025. In an apartment syndication, it applies to the parts of the property with a recovery period of 20 years or less, which a cost segregation study identifies, not to the 27.5-year building. The deduction reaches investors through their K-1, and for most limited partners the passive activity loss rules still decide when it can be used.
This post explains the rule, the acquisition date test and how bonus depreciation shows up for an investor. Rules are as of October 2026. Confirm your own situation with a tax professional.
What changed in 2025?
Before the 2025 law, bonus depreciation was phasing down. Publication 946 says the allowance is limited to 40% for certain qualified property acquired after September 27, 2017 and placed in service in 2025, if acquired before January 20, 2025.
Public Law 119-21, commonly known as the One Big Beautiful Bill Act, changed that. The IRS's January 2026 release on Notice 2026-11 says the law "provides a permanent 100-percent additional first year depreciation deduction for qualified property acquired ... after Jan. 19, 2025." Notice 2026-11 lets taxpayers generally rely on the existing bonus depreciation regulations while new guidance is written.
The IRS also describes an election to take 40% instead of 100% for qualified property placed in service during the first tax year ending after January 19, 2025. Deals sometimes use elections like this to manage taxable income, and the choice is made by the partnership.
Which parts of an apartment deal qualify?
Bonus depreciation applies to tangible property depreciated under MACRS with a recovery period of 20 years or less. Publication 946 says qualified property can be new or certain used property, which matters because most apartment purchases are used buildings.
| Part of the purchase | Typical recovery period | Bonus eligible? |
|---|---|---|
| Land | Not depreciable | No |
| Apartment building structure | 27.5 years (residential rental property) | No |
| Appliances, carpet, some fixtures | Often 5 or 7 years | Yes, if identified |
| Parking lots, sidewalks, landscaping, fencing | Often 15 years | Yes, if identified |
The shorter-life parts are usually found through a cost segregation study, which splits the purchase price into these classes. Without one, most of the purchase is depreciated as building over 27.5 years. See cost segregation for apartment syndications.
Does the acquisition date matter?
Yes. Notice 2026-11 says property is not treated as acquired after the date a written binding contract for its acquisition is entered into. If the deal's purchase contract was signed on or before January 19, 2025, the property generally falls under the earlier phase-down, even if it closed later. If you are looking at a deal that closed in 2025, ask which date the sponsor's CPA used.
The property must also be placed in service, which for an apartment deal generally means available to rent. Renovations completed later are new property with their own dates.
How does bonus depreciation show up on my K-1?
The partnership claims depreciation, including bonus depreciation, in computing its own income or loss. It is not a separate line you choose on your own return. For a typical apartment deal, the result flows to you as part of the net rental real estate income or loss reported on your Schedule K-1.
Publication 946 says a taxpayer can elect, for any class of property, not to take bonus depreciation for all property in that class placed in service during the year, and that the election cannot be revoked without IRS consent. In a partnership, that election is the partnership's. The operating agreement and the deal's accountant decide how depreciation is allocated among the partners.
Can I use the losses?
Not always in the year they appear. Three sets of limits apply, in order:
- Basis. You generally cannot deduct partnership losses beyond your basis in the interest.
- At-risk rules. Losses are limited to the amount you have at risk.
- Passive activity rules. Under section 469, rental activity is generally passive, and a limited partner in a syndication is usually a passive investor. Passive losses can offset passive income. Unused losses carry forward and are generally released when you dispose of your entire interest in a taxable sale.
For most limited partners with W-2 income, bonus depreciation creates a suspended loss rather than a deduction against wages. Real estate professional status can change that in some cases; see real estate professional status and syndication losses. An excess business loss limit can also apply to noncorporate taxpayers under section 461(l).
A made-up example
This example is made up, with round numbers chosen so the math is easy to follow. It is not a projection or tax calculation.
A deal buys an apartment property for $10,000,000 under a contract signed in March 2025. Land is $1,500,000, so the depreciable basis is $8,500,000. A cost segregation study classifies 25% of that, $2,125,000, as 5-, 7- and 15-year property.
- With 100% bonus, the partnership deducts the full $2,125,000 in the first year, plus regular depreciation on the building portion.
- An investor allocated 2% of the losses would see $2,125,000 x 2% = $42,500 of that bonus deduction in their share of the deal's rental loss (ignoring the deal's other income and expenses to keep it simple).
- If the investor has $10,000 of passive income from another rental, they may be able to use $10,000 this year. The other $42,500 - $10,000 = $32,500 is suspended and carried forward.
The deduction is the same either way. What changes is when the investor can use it.
What happens when the property sells?
Bonus depreciation lowers the deal's basis in the property, so the gain at sale is larger. Gain tied to depreciation on personal property, such as appliances and carpet, is generally recaptured as ordinary income under section 1245 rather than taxed at long-term capital gain rates, and other recapture rules apply to land improvements and the building. Plan for that before counting the first-year deduction as a pure benefit. See depreciation recapture when a syndicated building sells.
States also matter. Some states do not follow federal bonus depreciation, so your state return may show a different number.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from their friends and followers under Rule 506(b) or 506(c). DoorRaise prepares the standard offering documents, forms the LLC, files Form D and state notices, and verifies accredited investors for 506(c) deals. Escrow is at Enterprise Bank & Trust, an FDIC-insured bank, investors fund by wire only and distributions are quarterly by default. Fees are $1,500 at setup (non-refundable), $5,000 at closing (only if the deal closes) and $3,500 a year, with no percentage of the raise and no part of the promote. The deal's own accountant prepares the K-1s and makes the depreciation choices. DoorRaise is not a law firm, broker-dealer, investment adviser, funding portal or bank, and gives no tax advice.
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FAQ
Is 100% bonus depreciation permanent now?
The IRS describes it as permanent for qualified property acquired after January 19, 2025. A future law could change it, as earlier laws did.
Does bonus depreciation apply to the building itself?
No. A residential rental building has a 27.5-year recovery period, and only property with a recovery period of 20 years or less qualifies.
Can I choose whether to take bonus depreciation on my share?
No. The partnership makes depreciation choices and elections. You receive the result on your K-1.
Will bonus depreciation reduce taxes on my salary?
For most limited partners, no. The losses are generally passive and can offset passive income, with the rest carried forward. Ask your CPA how it applies to you.
Next step: read cost segregation for apartment syndications to see how the bonus-eligible parts are identified.
Sources
- IRS: Treasury, IRS issue guidance on the additional first year depreciation deduction (IR-2026-06)
- IRS Notice 2026-11
- IRS Publication 946, How to Depreciate Property
- Public Law 119-21
- 26 U.S.C. 168, including 168(k)
- 26 U.S.C. 469, passive activity losses
- 26 U.S.C. 461, including 461(l)
This article is general information as of October 2026, not legal, tax or investment advice. The example uses made-up numbers. Talk to a tax professional about your own situation. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.