In commercial and multifamily real estate, cash flow drives performance. Property owners, developers, and CPAs face constant pressure to improve returns and reduce tax exposure. A major shift is underway: bonus depreciation is nearing its final phase-down.

If you ignore this change, you risk leaving money on the table. If you plan ahead, you can protect and strengthen your cash position.

The Stakes: Changing Rules, Real Financial Impact

For years, 100% bonus depreciation allowed immediate write-offs on eligible property components. Investors significantly boosted upfront cash flow and reinvested that capital or reduced debt.

Now, the landscape has shifted.

Bonus depreciation rates:

• 80% for property placed in service in 2023

• 60% for property placed in service in 2024

• 40% for property placed in service in 2025

• 20% for property placed in service in 2026

• 0% for property placed in service in 2027 and beyond

As percentages decline, immediate deductions shrink. Tax liability increases in the short term, and cash flow tightens.

For example, an asset that once qualified for a full write-off now receives only a 20% deduction in 2026. The remaining balance must be depreciated over its standard life. Timing is now critical.

The Framework: Sustaining Cash Flow Through Strategy

Maintaining strong cash flow requires understanding every available tool. Below are the most effective strategies to consider in 2026.

1. Bonus Depreciation and the Final Phase-Down

Bonus depreciation allows businesses to deduct a large percentage of eligible property costs in the year the asset is placed in service. Instead of spreading deductions over decades, you accelerate them into the present year.

With the rate now at 20% in 2026, immediate deductions are significantly reduced compared to prior years.

As a result:

• Short-term tax liability increases

• Immediate liquidity declines

• Strategic timing becomes more important

Investors must now look beyond bonus depreciation alone.

2. Cost Segregation: A Strategic Accelerator

Even with reduced bonus rates, cost segregation remains highly effective.

Rather than depreciating an entire building over 27.5 or 39 years, a cost segregation study reallocates qualifying components into 5-, 7-, or 15-year property categories.

Engineers analyze the property and identify elements such as:

• Specialized electrical systems

• Decorative finishes

• Site improvements

• Certain plumbing components

By reclassifying these assets, a larger portion of the building’s basis qualifies for accelerated depreciation.

Example:

If a study reallocates $1 million into shorter-lived property:

• With 20% bonus depreciation, $200,000 may be deducted immediately

• The remaining $800,000 depreciates over 5, 7, or 15 years instead of 27.5 or 39 years

Even in 2026, this strategy materially improves cash flow timing.

Cost segregation remains one of the most powerful tax planning tools available to commercial and multifamily owners.

3. Additional Incentives: 45L and 179D

Beyond depreciation, energy incentives can directly reduce tax liability.

45L Tax Credit (Residential)

Developers of energy-efficient residential properties may qualify for the 45L Tax Credit.

Unlike a deduction, this is a dollar-for-dollar tax credit.

• Applies to qualifying homes acquired after December 31, 2022

• Credits range from $500 to $5,000 per unit

• Requires compliance with ENERGY STAR or Zero Energy Ready Home standards

• Prevailing wage requirements may apply

Large multifamily developments can generate substantial credits.

179D Deduction (Commercial)

Commercial property owners, architects, and engineers working on qualifying government projects may benefit from the 179D deduction.

Applies to improvements in:

• Lighting systems

• HVAC systems

• Building envelope components

A qualified certification is required to verify energy savings.

• Deduction may reach up to $5.00 per square foot

• Applies to property placed in service after 2022

Energy upgrades can improve sustainability and after-tax returns.

Your 2026 Action Plan

Proactive planning produces stronger financial outcomes.

Review recent projects
If property was placed in service in 2023, 2024, or 2025, evaluate whether a cost segregation study can capture higher bonus rates before full elimination in 2027.

Plan future acquisitions strategically
Even at 20% bonus depreciation in 2026, cost segregation materially increases upfront deductions compared to traditional depreciation.

Evaluate energy efficiency opportunities
Residential developers should analyze 45L eligibility. Commercial owners should assess 179D deductions.

Collaborate with specialists
Engineering analysis and documentation are essential for compliance and audit protection.

The objective is liquidity. Accelerated deductions reduce tax exposure and increase usable capital, which can fund acquisitions, improvements, or debt reduction.

Frequently Asked Questions

Q1: How does the bonus depreciation phase-down affect cash flow?

As bonus percentages decline, immediate deductions decrease. More taxable income remains in the current year, leading to higher short-term tax payments and reduced immediate cash flow.

Q2: Is cost segregation still valuable without 100% bonus depreciation?

Yes. The primary benefit is reclassification into shorter recovery periods. Even with only 20% bonus in 2026, assets still depreciate over 5, 7, or 15 years instead of 27.5 or 39 years, accelerating deductions.

Q3: What is the first step to evaluate eligibility?

Gather acquisition, construction, or renovation cost data. Consult a qualified specialist for a preliminary benefit analysis to estimate potential savings.

Q4: How does SegPro Solutions coordinate with my CPA?

SegPro Solutions provides engineering-based studies and audit-ready documentation. Your CPA integrates the findings into your broader tax strategy to ensure compliance and maximize incentives.