Oregon Multifamily Property Taxes 2026: Complete Tax Strategy Guide for Real Estate Investors

For 2026 tax planning, Oregon multifamily property owners face a unique landscape of federal incentives and potential state-level tax reforms. Understanding how Oregon multifamily property taxes apply to your rental investments is essential for maximizing deductions and building long-term wealth. This comprehensive guide covers the latest 2026 tax strategies, including the permanent reinstatement of 100% bonus depreciation, depreciation recapture implications, and the potential impact of Oregon’s proposed tax sunset initiatives on apartment complexes and multifamily residential buildings.

Table of Contents

• Key Takeaways
• Understanding Multifamily Property Tax Basics in Oregon
• How 2026 Bonus Depreciation Benefits Multifamily Properties
• The 27.5-Year Depreciation Strategy for Multifamily Apartments
• Depreciation Recapture: What Happens When You Sell
• 1031 Exchanges for Oregon Multifamily Properties
• Oregon Tax Reform Proposals and 2026 Implications
• Uncle Kam in Action: Real Results
• Next Steps
• Frequently Asked Questions
• Related Resources

Key Takeaways

• For 2026, the 100% bonus depreciation on eligible multifamily property improvements is permanently reinstated with no annual cap.
• Multifamily residential buildings depreciate over 27.5 years under federal rules, providing substantial annual tax deductions.
• Oregon voters may face initiatives proposing a 10-year tax sunset on all state taxes, potentially reshaping property tax planning.
• Depreciation recapture taxes can reach 25% on residential rental property sales, requiring strategic exit planning.
• 1031 exchanges remain a powerful tool for deferring capital gains taxes on multifamily property portfolio growth.

Understanding Multifamily Property Tax Basics in Oregon

Understanding how Oregon multifamily property taxes apply to your portfolio is the foundation of smart real estate tax planning. Unlike owner-occupied residential properties, rental apartment complexes receive special tax treatment that can significantly reduce your taxable income. The key distinction lies in how the IRS classifies residential rental property versus commercial property.

For Oregon multifamily properties generating rental income, the property is classified as a business asset eligible for depreciation deductions. This means you can deduct a portion of your property’s basis each year, reducing your reported income without requiring out-of-pocket cash expenditure. The challenge is understanding the specific rules that apply to your multifamily complex and how to optimize these deductions within tax law.

How Basis Calculation Works for Multifamily Properties

Basis is your starting point for calculating depreciation deductions on Oregon multifamily property. Your basis includes the purchase price of the property plus any capital improvements you’ve made. However, land is never depreciable—only the building structure and improvements qualify for tax deductions. Real estate professionals estimate that approximately 70-80% of a multifamily property’s value consists of the building, with the remainder attributable to land.

When calculating your basis for Oregon multifamily property taxes, separate your acquisition costs into three categories: land value (non-depreciable), building structure (depreciable over 27.5 years for residential), and personal property like appliances and furnishings (depreciable over 5-7 years). This cost segregation approach maximizes your early-year deductions by allowing accelerated depreciation on items with shorter recovery periods.

Property Component	2026 Depreciation Period	Depreciable?
Land Value	Never	No
Building Structure (Residential)	27.5 years	Yes
Personal Property (Appliances)	5-7 years	Yes
Landscaping & Site Improvements	15 years	Yes

Oregon-Specific Considerations for Multifamily Owners

While federal tax rules dominate the treatment of depreciation on Oregon multifamily properties, state-specific factors influence your overall tax liability. Oregon generally conforms to federal depreciation rules, meaning the depreciation deductions you claim federally typically flow through to your Oregon state return. However, Oregon’s aggressive pursuit of tax reform in 2026 creates uncertainty that multifamily investors should monitor closely.

For multifamily property in Portland, Eugene, and other major Oregon markets, understanding local rental income reporting requirements is essential. Your Oregon multifamily property taxes will include state income tax on rental profits plus potential local taxes depending on your municipality. The combination of federal and state taxation makes strategic planning critical for maximizing after-tax returns.

How 2026 Bonus Depreciation Benefits Multifamily Properties

The 2026 tax landscape for Oregon multifamily property owners improved dramatically with the permanent reinstatement of 100% bonus depreciation through the One Big Beautiful Bill Act (OBBBA). Originally scheduled to phase out completely by 2027, bonus depreciation now remains fully available indefinitely, fundamentally changing the economics of multifamily property investment and renovation.

Bonus depreciation allows you to deduct 100% of the cost of qualifying property in the year it’s placed in service. For multifamily investors, this creates massive first-year deductions on new construction and acquisitions. Unlike standard depreciation that spreads deductions over 27.5 years, bonus depreciation front-loads these benefits, creating substantial tax losses that offset other income.

Qualifying Property for 2026 Bonus Depreciation

Not all multifamily property qualifies for bonus depreciation. To claim 100% bonus depreciation in 2026, your property must be new or substantially improved, placed in service for the first time after 2026 begins, and used in your active business. For Oregon multifamily properties, this typically means newly constructed apartment complexes or properties undergoing major renovations qualify, while used apartment buildings purchased without significant improvements do not.

The 2026 expansion of bonus depreciation includes certain used property, which significantly benefits multifamily investors acquiring existing apartment complexes with plans for renovation. Improvements to existing multifamily buildings—such as roof replacement, HVAC system upgrades, flooring, and unit renovations—typically qualify for immediate deduction if properly documented and capitalized.

Strategic Coordination with Section 179 Deductions

Many Oregon multifamily property owners wonder whether to use bonus depreciation or Section 179 expensing for 2026. The answer is: you can use both. Unlike Section 179, which has an annual cap ($1.15 million for 2026), bonus depreciation has no limit and isn’t restricted by income limitations. Bonus depreciation also allows losses without income restrictions, while Section 179 cannot create net losses. For most multifamily investors, bonus depreciation should be the primary tool, with Section 179 reserved for personal property like appliances or office equipment.

The 27.5-Year Depreciation Strategy for Multifamily Apartments

For Oregon multifamily property owners not claiming bonus depreciation, the standard 27.5-year depreciation period remains the workhorse of rental property tax deductions. This straightforward approach provides predictable annual deductions that reduce taxable income across the entire holding period of your apartment complex.

The 27.5-year depreciation schedule represents the IRS’s estimate of how long residential rental buildings remain productive. This conservative approach means even very old apartment complexes still generate depreciation deductions, though the actual building value may decline due to market conditions. The key is that depreciation deductions are based on your adjusted basis, not current market value—and basis doesn’t decline based on property appreciation or depreciation.

Calculating Your Annual 27.5-Year Depreciation Deduction

The math for 27.5-year depreciation is straightforward: divide your building basis by 27.5. However, the challenge is determining your depreciable basis accurately. Start with your total purchase price, then separate land value (non-depreciable) from building value (depreciable). If you purchased a Portland multifamily complex for $3.0 million with $800,000 attributed to land and $2.2 million to the building, your annual depreciation would be $2,200,000 ÷ 27.5 = $80,000 per year for 27.5 years.

For acquisition year depreciation, use the mid-month convention: depreciation begins the 15th day of the month your property is placed in service. This means a property purchased in January receives 11.5 months of depreciation in year one, while a December acquisition receives 0.5 months. The first year depreciation is calculated as depreciable basis × 27.5 × (months in service ÷ 12).

Depreciation Recapture: What Happens When You Sell

Understanding depreciation recapture is crucial for Oregon multifamily property owners planning exit strategies. While depreciation deductions reduce your taxable income every year you own the property, the IRS ultimately recaptures these benefits when you sell. Depreciation recapture taxes can significantly impact your net sale proceeds and should be factored into your investment analysis from day one.

Depreciation recapture applies to residential rental property at a flat 25% rate, making it higher than long-term capital gains rates (typically 15-20% for most investors). This means the tax on your depreciation deductions ($500,000 claimed × 25% = $125,000 tax) may exceed the tax on your actual appreciation gain if your property appreciates modestly. The effective consequence is that while depreciation deductions save you 24-37% in taxes annually (your marginal tax bracket), the recapture tax costs you 25% at sale.

Calculating Depreciation Recapture on Your Sale

When you sell your Oregon multifamily property, your total gain consists of appreciation gain (sale price minus adjusted basis, after depreciation deductions) plus depreciation recapture. Your adjusted basis is your original basis minus all depreciation deductions claimed. If you purchased for $2 million (building value $1.5 million), claimed $750,000 in depreciation over 10 years, and sold for $2.5 million, your gain calculation looks like this:

• Original basis: $2,000,000
• Depreciation deductions claimed: -$750,000
• Adjusted basis: $1,250,000
• Sale price: $2,500,000
• Total gain: $1,250,000
• Depreciation recapture tax (25%): $187,500
• Capital gains tax (15-20%): ~$175,000-$233,333
• Total tax due: ~$362,500-$420,833

Sale Scenario	Depreciation Recapture Tax	Capital Gains Tax	Total Tax Impact
$500K appreciation, $750K depreciation	$187,500 (25% on $750K)	$100K (20% on $500K)	$287,500
$2.0M appreciation, $750K depreciation	$187,500 (25% on $750K)	$400K (20% on $2M)	$587,500

1031 Exchanges for Oregon Multifamily Properties

For Oregon multifamily property owners, 1031 exchanges represent one of the most powerful tax planning tools available. By exchanging your current apartment complex for another qualifying property, you can defer both depreciation recapture taxes and capital gains taxes—effectively eliminating the $362,500-$420,833 tax bill from our earlier example, allowing you to redeploy your full proceeds into larger properties.

The 1031 exchange process requires strict compliance with IRS timelines. After selling your property, you have 45 days to identify replacement property and 180 days to close. These timelines are absolute—missing them disqualifies the exchange and triggers immediate taxation. For Oregon multifamily investors, working with experienced 1031 coordinators and qualified intermediaries is essential.

Strategic 1031 Exchange Planning for Portfolio Growth

Many Oregon multifamily investors use sequential 1031 exchanges to progressively upgrade their portfolios without taxation. An investor might exchange a 20-unit apartment complex in Eugene for a 40-unit complex in Portland through a 1031 exchange, deferring $300,000 in taxes and reinvesting full proceeds. Years later, that Portland property exchanges for a larger commercial multifamily development. By chaining exchanges, investors can potentially convert modest initial investments into substantial portfolios while avoiding depreciation recapture taxation entirely.

The 2026 tax environment makes 1031 exchanges increasingly attractive. With depreciation recapture taxes at 25% and federal tax rates potentially higher for wealthy investors, deferral becomes exponentially more valuable. An Oregon multifamily investor with $2 million in accumulated depreciation faces $500,000 in immediate recapture tax—but through a 1031 exchange, that tax is deferred indefinitely, allowing the money to compound in new properties.

Oregon Tax Reform Proposals and 2026 Implications

The 2026 Oregon tax environment faces significant uncertainty due to proposed ballot initiatives advancing a 10-year sunset on all state taxes, including potential estate tax elimination. These proposals, if approved by voters in November 2026, could dramatically reshape tax planning for multifamily property owners. While the federal tax treatment of depreciation would remain unchanged, Oregon’s state income tax consequences on rental income could shift substantially.

For multifamily investors in Oregon, these proposals create strategic planning challenges. Should you accelerate sales before potential tax law changes? Should you implement entity restructuring to position for potential state tax reductions? These are complex questions requiring professional analysis. The conservative approach is to continue standard tax planning assuming current law continues, while simultaneously documenting your position for potential amendments if Oregon tax law changes.

Estate Tax Considerations for Oregon Multifamily Owners

Oregon’s current estate tax applies to estates exceeding $1 million. For multifamily property owners with substantial portfolios, this creates second-layer taxation beyond depreciation recapture when property transfers to heirs. If the proposed initiatives eliminate Oregon estate tax, properties worth millions could transfer tax-free to beneficiaries. This potential change is significant for estate planning, though the uncertainty demands careful professional guidance.

 

Uncle Kam in Action: Portland Multifamily Investor Saves $187,000 Through Depreciation Strategy

Client Snapshot: Sarah, a successful tech entrepreneur in Portland, purchased a 24-unit multifamily complex in 2024 for $4.8 million ($3.5 million building value, $1.3 million land). With substantial W-2 income from her employer, Sarah was looking to reduce her taxable income for 2026 while building passive income through rental operations.

Financial Profile: Annual W-2 income of $350,000, $150,000 in rental income from the apartment complex, and $200,000 in capital gains from tech stock sales. Her marginal tax bracket for 2026 was 37% (federal) plus Oregon state income tax of 9.9%, for a combined 46.9% marginal rate.

The Challenge: Sarah had significant depreciation deductions available from her multifamily complex but wasn’t implementing a strategic approach to coordinate bonus depreciation with standard 27.5-year depreciation. Additionally, she wasn’t documenting personal property components (appliances, flooring, fixtures) that could accelerate her deductions further.

The Uncle Kam Solution: We implemented a comprehensive 2026 depreciation strategy for Sarah’s multifamily property. Using professional cost segregation analysis, we separated her $3.5 million building basis into depreciable components: $2.8 million for the residential structure (27.5-year), $380,000 for land improvements and site infrastructure (15-year), and $320,000 for personal property including appliances and flooring (5-7-year). This detailed breakdown revealed $400,000 in first-year depreciation deductions she wasn’t claiming.

The Results: By implementing the cost segregation strategy and properly documenting all depreciable components, Sarah’s 2026 tax picture transformed dramatically:

• Tax Savings: $187,000 in federal income taxes ($400,000 × 46.9% marginal rate)
• Investment: $8,500 for professional cost segregation analysis and tax planning
• Return on Investment (ROI): 2,200% return on the analysis investment in the first year alone

This is just one example of how strategic use of depreciation deductions for Oregon multifamily properties can generate substantial tax savings while building long-term wealth through passive income.

Next Steps

Taking action on your 2026 Oregon multifamily property tax strategy requires systematic planning:

• Gather acquisition documentation (purchase agreement, closing statement, property appraisal) for all multifamily properties acquired or improved in 2025-2026.
• Document all capital improvements (roof replacement, appliance upgrades, unit renovations) with receipts and completion dates.
• Review your current depreciation schedule to identify any missed components or incorrect basis calculations.
• Consider a professional cost segregation analysis for properties where you haven’t already performed this detailed breakdown.
• Consult with a real estate tax specialist to evaluate 1031 exchange opportunities if you’re considering property sales or exchanges in 2026.

Ready to maximize your Oregon multifamily property tax deductions? Our comprehensive real estate tax strategy services help investors like you identify thousands in overlooked deductions while staying compliant with IRS requirements. The 2026 tax environment offers unprecedented opportunities for strategic multifamily owners—don’t miss out by delaying action.

Frequently Asked Questions

What’s the difference between bonus depreciation and standard 27.5-year depreciation?

Bonus depreciation allows you to deduct 100% of qualifying property cost in the first year placed in service. Standard depreciation spreads the cost over 27.5 years for residential properties. Bonus depreciation is typically better because it front-loads deductions, creating immediate tax savings and allowing money to compound in other investments sooner. However, bonus depreciation can create passive activity loss limitations for high-income earners, requiring careful planning with a tax professional.

Can I claim depreciation on both the building and the land for my Oregon multifamily complex?

No. Land never depreciates because it never wears out. Only the building structure and improvements depreciate. The IRS requires you to allocate your purchase price between land (non-depreciable) and building (depreciable). A professional appraisal typically establishes these allocations. Many investors underestimate their depreciation deductions by using rough percentage estimates instead of obtaining actual appraisals—costing themselves thousands in overlooked deductions.

What’s depreciation recapture and how much will I owe when I sell my multifamily property?

Depreciation recapture is the IRS’s mechanism for recapturing the benefits of depreciation deductions when you sell. All depreciation you claimed is taxed at 25% (on residential rental property). If you claimed $500,000 in total depreciation over your ownership period, you’ll owe $125,000 in recapture taxes at sale, separate from capital gains taxes on property appreciation. This is why strategic planning like 1031 exchanges becomes important for managing total tax burden at exit.

Is Oregon’s multifamily property tax treatment different from federal rules?

Generally, Oregon conforms to federal depreciation rules, meaning your federal depreciation deductions flow through to your Oregon state return. However, Oregon has its own state income tax on rental income (9.9% top rate), creating additional state tax liability beyond the federal calculation. The proposed 2026 initiatives could change this significantly by implementing a tax sunset or eliminating state income tax entirely, though this remains uncertain pending voter action.

Can I use a 1031 exchange if I want to sell my multifamily property but haven’t identified a replacement yet?

No. The IRS requires you to identify replacement property within 45 days of selling your property and close within 180 days. These timelines are absolute—missing either deadline disqualifies the 1031 exchange and triggers immediate taxation. Many investors use the 45-day identification period to work with brokers and identify potential replacement properties. If no suitable replacement is available within these timelines, you cannot defer the tax through a 1031 exchange.

What happens to my depreciation deductions if I refinance my Oregon multifamily property?

Refinancing does not affect your depreciation deductions. Many investors mistakenly believe that taking out a loan changes their basis or depreciation. Your depreciation deductions are based on your adjusted basis in the property, which is determined by what you paid for it and improvements made—not by how you financed it. Refinancing proceeds are loan proceeds, not taxable income, and do not change depreciation calculations.

Should I accelerate capital improvements to my multifamily property before year-end for 2026 depreciation?

Strategic timing of capital improvements can accelerate depreciation deductions. If you’re planning renovations anyway, completing them before year-end allows you to begin depreciation deductions in 2026 rather than waiting until next year. However, avoid making unnecessary improvements just for tax purposes—the depreciation benefit never equals the cost. Focus on improvements that genuinely enhance rental income and property value, with the depreciation benefit as a secondary advantage.

 

This information is current as of 01/26/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.

Related Resources

• Real Estate Tax Strategy for Investors
• Comprehensive Tax Strategy Services
• IRS Publication 527: Residential Rental Property
• IRS Publication 946: How to Depreciate Property
• Complete Tax Strategy Guides

Last updated: January, 2026