Tax deductions — including those derived from depreciation — are a critical part of most companies’ financial strategies. However, this year’s uncertainty in Washington is resulting in a particularly unclear tax landscape, especially as it pertains to deductions from real estate holdings and capital expenditures. Will Congress extend 100% bonus depreciation? Will capital gains rates and corporate tax rates change?

Waiting for legislative decisions to shape your capitalization strategy could prove costly. Delays in planning may lead to missed opportunities, potentially costing your business millions in tax savings.

The solution? Start preparing for the alternatives, including the possibility of no bonus depreciation, now. 

By exploring strategies to increase your tax deductions through your real estate holdings and capital expenditures, you can position your business for a predictable tax situation in 2025, no matter what happens in Congress.

Here’s how to get started:

Revisit the tangible property regulations and devise a long-term strategy for capital expenditures

The final tangible property regulations made waves when they were introduced in 2014, offering businesses a structured framework for distinguishing between capital expenditures and deductible repairs. But by 2018, many tax departments shifted their focus to 100% bonus depreciation, which seemed like a simpler alternative to the complexities of TPR.

This shift made sense at the time, especially since Qualified Improvement Property — a bonus-eligible asset classification for most interior building improvements — largely overlapped with expenditures that could otherwise be classified as repairs.

However, as bonus depreciation phases out, TPR is regaining relevance as a powerful tool for expensing long-lived expenditures. Through repairs studies, businesses can still achieve comparable (or even superior) deductions for QIP and other capital expenditures.

While a quality repairs study requires a detailed analysis by an experienced provider, the effort is worth the investment. Certain capital expenditures, including roofing work, exterior painting, HVAC overhauls and elevator work, can qualify as a repair despite their exclusion from QIP and bonus depreciation eligibility. Depreciation recapture is not an issue with repairs expensing, simplifying the accounting process.

And finally, don’t forget to revisit your De Minimis Safe Harbor Election when evaluating your portfolio. This can add up to big numbers depending on your types of capital spend.

Identify and quantify missed prior year opportunities

It’s not uncommon for historical tax fixed assets to be depreciated over unnecessarily long lives. Many of these assets could have been classified into shorter tax lives, allowing for accelerated deductions that went unclaimed. The good news? It’s not too late to take advantage of those missed opportunities and use them on your current year tax return. 

Lookback studies enable businesses to retroactively reclassify assets and capture deductions they missed in prior years. Cost segregation studies, repairs studies, tenant improvement allowance studies and direct reclassifications are all good candidates for potential lookback deductions. 

Implementing these retroactive changes is straightforward. By filing Form 3115, businesses can claim the full benefit of missed deductions in their current tax year without having to reopen prior-year tax returns. Accounting method changes related to these types of adjustments are typically “automatic,” making the process even simpler.

Lookback studies offer several key advantages. From a strategic standpoint, taxpayers can leverage favorable tax provisions from prior years, such as bonus depreciation, depending on when the analyzed expenditures were incurred. Correcting simple errors, such as reclassifying nonresidential real property to QIP, can yield meaningful value with minimal effort. Additionally, taking a one-time catch-up adjustment for missed prior year accumulated depreciation often results in millions of dollars in immediate tax savings.

Proactively identifying these opportunities and having an implementation plan in place can ensure that businesses don’t leave money on the table.

Don’t underestimate the value of a traditional cost segregation study

A cost segregation study remains one of the most effective tools for accelerating tax deductions, even as bonus depreciation phases out. By reclassifying newly constructed or acquired long-lived assets into shorter-lived property categories (such as five- or seven-year property), businesses can unlock substantial tax benefits.

Nearly every property type, from small-scale residential to major commercial venues and arenas, can yield valuable accelerated tax deductions through a cost segregation study.

And while investing in a cost segregation for tax purposes, make sure to align the final deliverable with your intended long-term goals. This could include segregating assets for financial reporting purposes, assigning physical locations, building system, and quantities to assets for future disposition purposes, and evaluating the expenditures for additional tax credit potential. Making that extra effort now means cleaner, more organized fixed asset records that simplify future accounting processes. And who doesn’t love clean fixed assets?

Be sure to talk about other peripheral impacts of a cost segregation study, including potential benefits to property tax bills.

Devise a custom strategy

Whether your goal is to maximize deductions this year, create a multi-year tax plan, or evaluate opportunities within your existing real estate portfolio, the time to act is now. You can develop a tailored strategy that aligns with your overall tax planning goals — regardless of what Congress decides.

The tax landscape may be uncertain, but businesses that plan can stay ahead. By revisiting tangible property regulations, exploring retroactive opportunities and leveraging cost segregation studies, you can optimize your tax position and unlock millions in savings.

Don’t wait for Congress to make a decision — start preparing today.

House Republican leaders are planning to accelerate new Medicaid work requirements to December 2026 in a deal with ultra-conservatives on the giant tax bill, according to a lawmaker familiar with the discussions.

The revised version of President Donald Trump’s economic package — slated to be released publicly Wednesday — calls to move up work requirements to December 2026 from 2029, the lawmaker said, who requested anonymity to discuss private talks.

Work requirements have been a sticking point in reaching agreement on Trump’s tax bill, as Speaker Mike Johnson attempts to navigate a narrow and fractious majority.

The December 2026 deadline could also become an issue in the midterm elections, just one month earlier with Democrats eager to criticize Republicans for restricting health benefits for low-income households.

The lawmaker said there will be a waiver process for states unable to quickly comply with the deadline. The person also said that changes to the federal match for Medicaid enrollees won’t be in the bill and talks continue on changes to Medicaid provider taxes.

The debate over Medicaid has pinned lawmakers from high-tax states against hardliners. But the new Medicaid work requirement date could alienate several moderates concerned about cuts to the health care program for low-income people and those with disabilities.

Johnson can only lose a handful of votes and still pass the bill, which is the centerpiece of Trump’s legislative agenda.

The new date is also likely to provoke a backlash in the Senate.

It will be very difficult for states to implement the work requirements in a year and a half, said Matt Salo, a consultant who advises health care companies and formerly worked for the National Association of Medicaid Directors.

Squeezing the process of creating work requirements in every state into a compressed time frame is “almost a guarantee it won’t work” and will result in people who qualify for health coverage getting kicked out of the program, Salo said.

“Trying to speed run this into a much tighter time frame to hit an arbitrary budget target is not a recipe for success,” Salo said.

House Speaker Mike Johnson said Republicans have reached an agreement to increase the state and local tax deduction to $40,000, suggesting a resolution to one of the final issues holding up President Donald Trump’s economic bill. 

“That is the agreement we came to,” Johnson told CNN Wednesday, in response to a question about raising the deduction cap to $40,000 from $10,000 for a decade.

“I think the SALT caucus, as they call themselves, it’s not everything they wanted, but I think they know what a huge improvement that is for their constituents and it gives them a lot to go home and talk about,” Johnson said.

The $40,000 SALT limit will phase out for annual incomes greater than $500,000, according to a person familiar with the matter. The income phaseout threshold would grow 1% a year over a decade, they said.

The cap is the same for both individual taxpayers and married couples filing jointly, the person added.

Several lawmakers — New York’s Mike Lawler, Nick LaLota, Andrew Garbarino and Elise Stefanik; New Jersey’s Tom Kean, and Young Kim of California — have threatened to reject any tax package that does not raise the SALT cap sufficiently.

It’s not clear that all those lawmakers have signed off on the deal.

Some SALT advocates have pushed for income limits as high as $750,000 and a 2% annual phaseout increase, according to another person familiar with the negotiations, who requested anonymity to discuss private talks.

Lawler told NPR in an interview Wednesday morning that lawmakers are still working through some “finer points,” but that he’s hopeful to reach a deal later in the day.

The current write-off is capped at $10,000, a limit imposed in Trump’s first-term tax cut bill. Previously, there was no limit on the SALT deduction and the deduction would again be uncapped if Trump’s first-term tax law is allowed to expire at the end of this year.

Johnson’s plan expands upon the $30,000 cap for individuals and couples included in the initial version of the tax bill released last week. That draft called for phasing down the deduction for those earning $400,000 or more. That plan was quickly rejected by several lawmakers from high-tax districts who called the plan insultingly low.

SALT has been among the thorniest issues for House leaders who are navigating the political realities of pushing an expensive tax bill through with their narrow and fractious majority. Trump has grown frustrated over the SALT demands and urged lawmakers on Tuesday to not let their parochial interests sink the bill.

Still, the agreement is also already causing a backlash from conservatives who are pushing for more spending cuts to offset the tax reductions in Trump’s economic package.

Representative Andy Harris, who chairs the conservative House Freedom Caucus, told Newsmax he thinks Republicans are “actually further away from the deal, because that SALT cap increase, I think, upset a lot of conservatives again.” 

The House Rules Committee debated Trump’s bill for hours early Wednesday, beginning at 1 a.m. Washington time, in order to meet Johnson’s self-imposed Thursday deadline to pass the legislation out of the House. Republicans are expected to soon release a revised version of the legislation that will address SALT and other unresolved issues.

Republicans are also sparring over spending reductions in the bill, including weighing cuts to Medicaid health coverage and food assistance for low-income households.

House Republicans leaders are planning to accelerate new Medicaid work requirements to December 2026 from 2029 in a deal with ultra-conservatives to cut additional health spending.