Skip to main content

Industry tax guide

Multifamily developers tax and accounting

Tax planning from construction loan to stabilized property.

Multifamily Developers business environment

Multifamily developers carry a project from land and entitlements through construction, lease-up and stabilization, often with investor partners and construction lenders watching every draw.

The largest tax benefit usually arrives when the building is placed in service, through cost segregation and bonus depreciation. The 2025 tax law also changed the rules for residential construction contracts and ended two energy incentives in mid-2026.

Compared with a general business

What makes taxes different for multifamily developers

Development-period capitalization

Interest, taxes and other carrying costs during construction are capitalized into the building.

Residential contract exemption

Residential construction contracts, including multifamily, are exempt from percentage-of-completion for contracts entered into in tax years beginning after July 4, 2025.

Energy incentives with June 2026 cutoffs

45L ended for units acquired after June 30, 2026, and 179D for construction beginning after that date.

Investor partnerships

Developers report to equity partners through K-1s, with promote structures and allocations that change as projects stabilize.

The rules in detail

Tax rules for multifamily developers

Cost segregation plus 100% bonus depreciation

Appliances, cabinets, flooring, site work and amenities in an apartment building are 5-, 7- and 15-year property. With bonus depreciation at 100% for property acquired after January 19, 2025, those components can be deducted in the year the building is placed in service.

45L and 179D ended in mid-2026

The 45L credit, $500 to $5,000 per unit depending on certification, ended for units acquired after June 30, 2026. The 179D deduction, available for multifamily buildings of four stories or more, ended for construction beginning after June 30, 2026. Earlier units and projects can still be claimed.

Construction contracts and period interest

Residential construction contracts, including multifamily, are exempt from the percentage-of-completion method for contracts entered into in tax years beginning after July 4, 2025. Interest during construction is generally capitalized into the building's cost.

Planning moves

Ways to save tax in multifamily developers

  1. Cost segregation at placed-in-service

    Appliances, finishes and site work depreciate over 5, 7 and 15 years.

  2. 100% bonus depreciation

    Short-lived components acquired after January 19, 2025 can be deducted in year one.

  3. Claim 45L and 179D still available

    Units leased by June 30, 2026 and buildings started by then are documented and claimed.

  4. Use opportunity zones

    Projects in qualified opportunity zones can defer and reduce capital gains for investors.

  5. Plan the promote

    Promote and carried interest structures are designed with the holding period rules in mind.

  6. Exchange at sale

    A 1031 exchange can defer gain when a stabilized property is sold.

Working with OICPA

How we help

Service

Cost segregation at placed-in-service

A study timed to the certificate of occupancy, so the first-year deduction reaches investors on the first K-1.

Cost Segregation Coordination
Service

Claim 45L and 179D still in the pipeline

Units leased by June 30, 2026 and buildings that began construction by then, documented and claimed.

Real Estate Tax Planning
Service

Development and lease-up accounting

Draw tracking, capitalized interest and the move from construction to operating books.

Property-Level Accounting

Bookkeeping and reporting

The accounting behind the tax work

Build a handoff from development accounting to property reporting and coordinate depreciation analysis with qualified specialists.

The operating challenge

Construction spending, interest, lease-up costs, and investor capital move on different schedules as a project transitions into an operating property.

The records that matter

Development budgets, draw packages, capital account records, lease-up reports, and placed-in-service documentation give the review a practical starting point. We identify missing information before recommending changes.

What you can expect

  • A prioritized review of the industry-specific accounting issues above
  • A tailored reporting and document checklist based on your operating records
  • An agreed action plan connecting financial reporting, tax deadlines, and specialist coordination

Frequently asked questions

When should we order a cost segregation study?

Ideally before the building is placed in service, so the study uses the final cost data and the deduction lands in the first year.

Can units leased in early 2026 still get 45L?

Yes, if they were acquired, by lease or sale, on or before June 30, 2026 and meet the certification standard.

Does 179D apply to apartment buildings?

Only to residential rental buildings of four or more stories above grade, and only where construction began on or before June 30, 2026.

Related articles

References

  1. 26 U.S. Code § 168: Accelerated cost recovery systemLegal Information Institute, Cornell Law School
  2. 26 U.S. Code § 45L: New energy efficient home creditLegal Information Institute, Cornell Law School
  3. 26 U.S. Code § 179D: Energy efficient commercial buildings deductionLegal Information Institute, Cornell Law School
  4. 26 U.S. Code § 460: Special rules for long-term contractsLegal Information Institute, Cornell Law School

Rules reflect federal tax law as of November 2026.