By Zane Willman | Associate Advisor, CCG Real Estate Advisors
When most investors think about real estate returns, they focus on the obvious:
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Cash flow from rents
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Appreciation over time
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The power of leverage / debt paydown
But there’s a fourth factor that often gets under appreciated. Depreciation.
You can’t see depreciation in the way you see rent checks or rising property values. But when used correctly, it can shield your income, lower your tax bill, and put more cash back into your pocket every single year.
And thanks to the recent “One Big Beautiful Bill,” these benefits are now better than ever.
What Is Depreciation
Think of depreciation as the IRS’s way of saying: “We know buildings wear down over time, so we’ll let you write off that cost little by little each year.”
For residential multifamily properties, the IRS assumes a useful life of 27.5 years. That means you can divide the value of your building (not the land) by 27.5 and deduct that amount every year.
- Example: If you buy a property for $2.75M, with $2M of value on the building, you can deduct about $72,700 every year. Even if the building is actually going up in value.
This is a paper loss that reduces your taxable income, without reducing your actual cash flow.
Why Depreciation Matters for Multifamily Investors
Here’s why this is such a big deal:
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Cash Flow Shield: Your rents are coming in, but your taxable income is lower. That means more cash stays with you.
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Fuel for Growth: The money you save in taxes can be reinvested into more properties, renovations, or debt paydown.
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Compounding Advantage: Over decades, this isn’t just saving a few thousand — it can mean hundreds of thousands, even millions, staying in your portfolio.
Put simply: cash flow builds wealth, but depreciation protects it.
100% Bonus Depreciation is Back!!!
Depreciation has always been powerful. But the recent “One Big Beautiful Bill” just made it even better.
Here’s what changed:
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Old Rule: Bonus depreciation rates were phasing out after 2022, reducing the ability to front-load tax savings.
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New Rule: You can now write off 100% of qualifying improvements in the same year you spend the money.
Case Study for Value-Add Multifamily
You buy a 10-unit property and spend $20K per unit on renovations = $200K in improvements.
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Under the new rule, that full $200K can be deducted in year one.
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That means offsetting rental income, preserving liquidity, and freeing up capital for your next deal.
For investors focused on value-add strategies, this is a game-changer.
Why Now Is an Opportune Time
Pairing bonus depreciation with today’s market conditions and you see why investors are taking advantage:
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Prices have softened due to higher interest rates.
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Supply is constrained, limiting new development.
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Stackable tax benefits (like 100% bonus depreciation) create massive opportunity.
Most buyers are sitting on the sidelines, waiting for rates to drop. But those who act now can acquire at today’s discounts and capitalize on returns with aggressive tax savings.
Key Points to Remember
Multifamily investing has always been one of the most resilient asset classes. But right now, the tax code is giving investors an extra tailwind.
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Depreciation lowers your taxable income.
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Bonus depreciation lets you accelerate those savings.
Together, they create a powerful engine for building and preserving wealth. Multifamily investing isn't about chasing home runs. It’s about playing the long game smarter and keeping more of what you earn along the way.
Next Steps
At CCG, we believe successful multifamily investing starts with access to the right knowledge and guidance. That is the foundation of what we’re built on, a brokerage focused on helping families grow and protect their wealth for decades to come. If you want more insights like this, join our CCG Insights Newsletter.
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References
Disclaimer
CCG Real Estate Advisors is not a licensed tax advisory firm. The information in this article is for educational purposes only and should not be considered tax or legal advice. Always consult with a licensed CPA or tax professional to understand how depreciation and other tax strategies apply to your individual situation.
