Buying Investment Property in the Fourth Quarter: What 2026 Tax Law Means for Portland Investors

by Suzanne Clark Cambray

Buying Investment Property in the Fourth Quarter: What 2026 Tax Law Means for Portland Investors

Buying

Federal tax law changed in 2025, and some of those changes matter if you are thinking about buying a rental property before the year ends. This post sticks to the facts: what changed, what did not, and what Portland investors should ask their CPA before writing an offer.

One caution up front. Tax benefits sit on top of a good property. They are not a reason to buy a weak one. Rent, condition, and price still come first.

What Changed for Rental Property Owners

100% bonus depreciation is permanent.

The 2025 federal tax law, the One Big Beautiful Bill Act, restored 100% bonus depreciation and made it permanent for qualifying property acquired and placed in service after January 19, 2025. IRS Notice 2026-11 is the current guidance. Bonus depreciation does not apply to the residential building itself, which is depreciated over 27.5 years. It can apply to shorter life components identified in a cost segregation study, such as appliances, carpeting, and land improvements like fencing and paving.

The 20% qualified business income deduction is permanent.

Owners whose rental activity qualifies as a business may deduct up to 20% of qualified business income. For 2026, the deduction begins to phase out above $201,750 of taxable income for single filers and $403,500 for joint filers. Not every rental qualifies, and one IRS safe harbor requires at least 250 hours of rental services a year.

What Stayed the Same and Still Helps

Building depreciation. The building, not the land, is depreciated over 27.5 years.

Operating costs. Mortgage interest, property taxes, insurance, and repairs are deductible against rental income. Property taxes on a rental are a business expense, separate from the personal state and local tax deduction cap.

Passive loss allowance. Active participants may deduct up to $25,000 of rental losses against other income, phasing out between $100,000 and $150,000 of modified adjusted gross income.

1031 exchanges. You can defer tax on a sale by buying replacement real property, with 45 days to identify it and 180 days to close.

Capital gains. Long term rates remain 0%, 15%, or 20%. Depreciation you claimed is taxed at up to 25% when you sell.

Why the Fourth Quarter Matters

The tax year closes on December 31, and depreciation starts when a property is ready and available to rent, not on the day you close. A property placed in service in December earns only a fraction of a year of standard depreciation. Bonus depreciation on shorter life components is what can change the first year picture, but only if the property is acquired and placed in service by December 31.

That makes the calendar the real constraint. To claim a 2026 deduction, you need a property you can close on, make rent ready, and have available to tenants before the year ends. A property that needs months of work may not be placed in service in time.

The Portland Catch: Oregon Does Not Follow Bonus Depreciation

In 2026, Oregon passed Senate Bill 1507, which disconnects the state from federal bonus depreciation for property placed in service in tax years beginning on or after January 1, 2026. In practice, Oregon taxpayers add the federal bonus amount back on their state return and recover the cost through regular depreciation instead.

The federal benefit remains. The Oregon benefit is smaller and slower. A Portland investor should ask a CPA to run both returns before buying.

Questions to Ask Before You Make an Offer

1. Can this property close and be available to rent by December 31?
2. Does a cost segregation study make sense at this price, and what does it cost?
3. How does the Oregon add back change my state return?
4. Do I qualify for the QBI deduction or the passive loss allowance at my income?
5. If I sell later, what is the recapture, and would a 1031 exchange apply?

Real estate is a long game, and tax law can change again. A good investment should make sense on rent, condition, and price before the tax benefits are counted. If it does, the 2026 rules may make the fourth quarter worth a serious look.

This is general information, not tax or legal advice. Tax rules are complex and depend on your situation. Please check with your CPA and lender before making decisions.

Thinking about adding a rental to your portfolio, or want to talk through timing? Contact me at 503.806.9332 or yourspace@movingtopdx.com and let's talk.

Suzanne Clark Cambray
Principal Broker, Moving to PDX Collective
Cascade Hasson Sotheby's International Realty
movingtopdx.com

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Suzanne Clark Cambray

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