Why 2026 Could Be the Year to Turn a Tax Liability Into a Commercial Real Estate Investment
As 2026 heads into its final months, business owners and investors are beginning to get a clearer picture of what their year-end tax liability may look like. A strong year is certainly something to celebrate, but writing a large check to the IRS usually isn’t anyone’s favorite part of the celebration.
For some taxpayers, purchasing commercial real estate before year-end may provide an opportunity to put capital to work, create long-term wealth and potentially generate meaningful tax deductions at the same time.
Instead of simply asking, “How much am I going to owe?”, it may be worth asking another question:
“Is there an opportunity to invest some of that capital into an asset that can benefit me for years to come?”
Commercial Real Estate Has Always Had a Tax Advantage
One of the fundamental advantages of owning income-producing commercial real estate is depreciation.
Although a property may actually increase in market value over time, the tax code generally allows an owner to depreciate the building and other eligible improvements. Nonresidential real property is generally depreciated over 39 years under the Modified Accelerated Cost Recovery System (MACRS).
That annual depreciation expense can potentially offset income generated by the property and, depending on the taxpayer’s individual circumstances, may provide additional tax benefits.
But the building itself is only part of the story.
Cost Segregation Can Accelerate the Benefit
A cost segregation study analyzes the components of a commercial property and identifies assets that may qualify for shorter depreciation schedules instead of treating virtually everything as part of the 39-year building.
Certain electrical systems, flooring, cabinetry, specialty plumbing, equipment, site improvements, landscaping, parking improvements and other components may potentially be classified into shorter-lived categories.
Why does that matter?
Because accelerating depreciation can move deductions that otherwise might be spread over decades into the earlier years of property ownership. For an investor or business owner with significant taxable income, that timing can make a substantial difference.
The IRS itself recognizes cost segregation as a method of identifying property that may qualify for shorter recovery periods and potentially for incentives such as bonus depreciation.
And 100% Bonus Depreciation Is Back
This is where 2026 becomes particularly interesting.
Federal tax legislation enacted in 2025 permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. Under current IRS guidance, eligible property can generally receive a 100% additional first-year depreciation deduction.
Importantly, that does not mean you can deduct 100% of the purchase price of an ordinary commercial building. Land isn’t depreciable, and the portion allocated to the building generally remains subject to the applicable real-property depreciation rules.
However, qualifying shorter-life assets identified through a cost segregation study may potentially be eligible for 100% bonus depreciation.
That combination can make purchasing commercial real estate especially compelling for taxpayers looking at a significant 2026 tax obligation.
A New Opportunity for Certain Production Properties
There is another significant provision business owners should know about.
Certain qualified production property may be eligible for a special 100% depreciation allowance. Generally, this provision applies to qualifying nonresidential real property used as an integral part of manufacturing, chemical production, agricultural production or refining activities.
The rules are specific, and not every industrial building qualifies. But for an owner-user purchasing or developing a facility for an eligible production business, the potential tax implications can be substantial.
This is another reason buyers should involve their CPA and tax advisors early in the acquisition process rather than waiting until after closing.
Don’t Buy a Building Just for a Deduction
Tax benefits can make a good commercial real estate investment better. They generally won’t make a bad investment good.
The fundamentals still matter.
Location. Purchase price. Financing. Rental income. Occupancy. Future rent growth. Building condition. Replacement costs. Exit strategy. And, for owner-users, whether owning the building makes more economic sense than continuing to lease.
A tax strategy should complement a sound real estate strategy—not replace one.
For business owners, purchasing an owner-user property can have benefits extending well beyond depreciation. Instead of paying rent to a landlord every month, the business may be helping pay down an asset owned by the business owner or a related real estate entity. Over time, that can create equity and potentially establish an additional source of retirement wealth.
For investors, commercial property can provide rental income, appreciation potential, leverage and depreciation, all within the same asset.
The Calendar Matters
If you’re considering a purchase for 2026 tax planning, October is a much better time to start the conversation than December 20.
Identifying the right property, negotiating a purchase agreement, completing due diligence, obtaining financing and closing escrow all take time. Tax benefits may also depend on when assets are placed in service, not simply when a purchase agreement is signed.
Waiting until the final weeks of December can severely limit your options.
That’s why the fourth quarter should be viewed as a planning window, not a starting gun.
Before You Write the Check…
If 2026 has been a profitable year, this may be the right time to bring Johnston Pacific on board.
Ask your CPA what your projected tax liability looks like. Determine whether commercial real estate ownership fits your long-term objectives. Discuss depreciation, cost segregation and bonus depreciation with your tax professional. Then determine what type of property makes sense from an investment or operational standpoint.
The objective isn’t simply to spend money to save taxes.
It’s to potentially redirect capital into an asset that can produce income, build equity and create long-term value, while taking advantage of the tax treatment available to you.
At Johnston Pacific Commercial Real Estate, we work with business owners and investors throughout South Orange County to identify commercial properties that fit both their immediate objectives and long-term investment strategies.
If purchasing commercial real estate is already on your radar, don’t wait until December to start looking.
The building you buy in 2026 could do a lot more than house your business or collect rent. It could become an important part of your long-term wealth and tax strategy.
Johnston Pacific Commercial Real Estate
South Orange County Commercial Real Estate Specialists
949-366-2020
This article is provided for general informational purposes only and is not tax, accounting, financial or legal advice. Tax treatment depends on individual circumstances. Buyers should consult their CPA, tax advisor and other appropriate professionals before making an investment or tax-planning decision.
