The bill would add § 168(o) to the Tax Code, to allow developers to claim a depreciation deduction in the year a residential rental property is placed in service. The deduction would only be allowed for new construction, the lawmakers explain in a press release, to ensure the tax benefit leads to increased housing supply.

The deduction would equal $150,000, multiplied by the total number of dwelling units. The bill also provides for an enhanced deduction of $250,000 per unit for certain projects that include income-restricted units.

Under the Modified Accelerated Cost Recovery System, or MACRS, depreciation for residential rental property is calculated using the straight-line method and a mid-month convention. Under IRC § 168(c), residential rental property has a recovery period of 27.5 years. Taxpayers may instead elect the Alternative Depreciation System under § 168(g)(2)(C), which carries a 30-year recovery period.

To dig deeper, visit the original article on the Thomson Reuters blog.