Introduction
If you’re planning to sell a home in Houston or expand your investment portfolio in 2026, understanding the latest real estate tax changes is essential. With new legislation, inflation adjustments, and updated depreciation rules taking effect, both sellers and investors can benefit from taking action before the year begins.
Below is a clear guide to the biggest tax shifts, how they impact Houston property owners, and the smart steps you can take now.
Major Tax Law Changes That Impact Real Estate in 2026
One of the most significant changes for real estate owners comes from new federal legislation under the One Big Beautiful Bill Act (OBBBA). While every situation should be reviewed with a tax professional, the broad impacts are worth understanding as you plan your 2026 strategy.
Key Federal Tax Changes to Note
- Income tax rates remain lower instead of rising as previously scheduled.
- The SALT (state and local tax) deduction cap increases through 2029, which may help investors who own property in higher-tax states before relocating to Texas.
- 100% bonus depreciation is restored and made permanent, which is a major win for investors buying or improving rental properties.
These updates influence everything from how you structure ownership to when you decide to sell.
Deductions, Depreciation & Opportunities for Investors
For investors across Houston suburbs like Katy, Cypress, The Woodlands, Sugar Land, and Spring, depreciation and deductions continue to be major tools for reducing taxable income.
What’s New for 2026
- 100% bonus depreciation applies to qualifying improvements placed into service after January 19, 2025.
- The 20% Qualified Business Income (QBI) deduction still applies to most rental pass-through entities and REIT dividends.
- Low-income housing tax credit (LIHTC) allocations are expanding beginning in 2026—an opportunity for investors drawn to affordable housing projects in rapidly growing areas like Conroe, Porter, New Caney, and Tomball.
For sellers, keeping meticulous records of improvements, expenses, and adjustments to your cost basis will help reduce taxable gain at the time of sale.
Capital Gains, Sale Timing & Entity Structure
Whether you’re listing a home in Cypress, selling a rental in Katy, or liquidating part of your portfolio in The Woodlands, your tax strategy should include evaluating capital gains implications.
Understanding 2026 Capital Gains
Inflation-adjusted tax brackets in 2026 will influence how your gain is taxed. Before you sell, model your capital gain based on:
- Adjusted tax brackets
- Holding period
- Depreciation recapture
- Possible exclusions (e.g., primary residence rules)
Why Ownership Structure Matters
Your entity—LLC, S-Corp, partnership—affects everything from deductions to QBI eligibility. Investors should review:
- Whether the activity is considered active or passive
- Whether the property qualifies as a trade or business
- How income flows through to personal returns
Sale Timing Strategies
Smart techniques to explore with your CPA:
- 1031 exchanges for investment properties (commonly used in high-growth areas like Katy and The Woodlands)
- Deferred sales trusts (when appropriate)
- Timing improvements to align with tax-year cutoffs
- Reviewing depreciation schedules before listing
Quick 2026 Real Estate Tax Checklist
Before selling or investing, use this checklist to guide your planning:
- Review acquisition dates, improvement dates, and bonus depreciation eligibility.
- Double-check your ownership entity for maximum deduction and QBI benefits.
- Model potential capital gains before listing in 2026.
- Maintain organized records of all improvements and expenses.
- Confirm any state or local tax updates, including SALT cap changes.
Applying these steps early can boost after-tax returns and streamline your real estate moves in 2026.
Conclusion
The 2026 real estate tax environment is evolving quickly, but with smart planning, you can minimize tax exposure, maximize deductions, and set yourself up for a more profitable sale or investment. Whether you’re selling a home in Houston or building wealth through rentals across the suburbs, the right strategy can give you a major advantage.
Thinking about selling or investing before the 2026 tax changes hit? Reach out to Jennifer Yoingco, REALTOR®, and her team, The Houston Suburb Group. They’ll help you get ready to EXPERIENCE LIVING IN HOUSTON TEXAS!
FAQs
1. What’s the biggest tax change for real estate investors in 2026?
The return of 100% bonus depreciation is one of the most impactful, allowing investors to expense qualifying improvements immediately instead of over time.
2. How do capital gains taxes change in 2026?
Capital gains brackets adjust for inflation, which can affect total tax owed. Sellers should calculate expected gain based on the updated IRS brackets. [VERIFY]
3. Does the SALT deduction change help Texas homeowners?
Texas has no state income tax, but the SALT cap increase may benefit those who own property in other states or relocated to Texas.
4. Should I restructure my rental property LLC before 2026?
Possibly. Entity structure affects QBI, depreciation, and gain treatment. A CPA can help determine your best setup.
5. Can a 1031 exchange still be used in 2026?
Yes—1031 exchanges continue to apply to investment properties, including rentals in Houston, Katy, The Woodlands, Cypress, and other suburbs.
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