Tax Benefits of Multifamily Renovation
Tax deductions and incentives for apartment renovation. Cost segregation, bonus depreciation, energy credits, and opportunity zones in Houston.
Tax deductions and incentives for apartment renovation. Cost segregation, bonus depreciation, energy credits, and opportunity zones in Houston.
Strategic tax planning can significantly reduce the effective cost of multifamily renovation. Consult your CPA for property-specific advice, but these are the primary tax benefits available to multifamily renovation investors.
Cost segregation reclassifies building components into shorter depreciation categories (5, 7, or 15 years instead of 27.5). Renovation of personal property items (cabinets, appliances, flooring) can be depreciated faster, accelerating tax benefits.
Under current tax law, certain renovation expenditures qualify for 60% bonus depreciation (2026). This allows immediate deduction of a significant portion of renovation costs in the year they're placed in service.
Section 179D provides deductions up to $5.00/sqft for energy-efficient improvements to commercial buildings, including multifamily properties. LED lighting, HVAC upgrades, and building envelope improvements may qualify.
Properties in designated Opportunity Zones offer tax advantages for capital gains invested in renovation. Several Houston neighborhoods qualify. Benefits include deferred and potentially reduced capital gains taxes.
IRS distinguishes between repairs (currently deductible) and improvements (must be depreciated). A single project can contain both. Proper classification by an experienced CPA maximizes current-year deductions.
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