In this episode, Toby Mathis, Esq., interviews Chris Streit, a tax incentive and cost segregation expert, about four major changes for real estate investors under Trump’s One Big Beautiful Bill. Chris explains how energy tax credits like 45L (residential) and 179D (commercial) are sunsetting on June 30, 2026, offering up to $5,000 per door for qualifying new construction. They discuss the brand new Qualified Production Property (QPP) provision that allows manufacturers to expense up to 70% of facility costs with zero recapture if held for 10 years—a game-changing opportunity for production facilities. The conversation covers the return of 100% bonus depreciation for properties acquired and placed into service after January 19, 2025, and how this creates immediate tax benefits for residential and commercial real estate investors. Chris and Toby also explore how investors who purchased properties before January 19th can still benefit from 100% bonus on improvements made after that date. Tune in for expert insights on maximizing these tax strategies before key provisions expire!
Chris Streit is the Chief Executive Officer of CSA Partners, a firm specializing in tax services like cost segregation, known for leading with operational excellence, customer-centricity, and driving significant growth in areas like tax incentives for real estate. He’s a seasoned executive with decades of experience in finance, investment, and leadership, having previously worked at major firms like Merrill Lynch and Bridgewater Associates.
Highlights/Topics:
- Energy tax credits 45L and 179D are sunsetting June 30, 2026—builders can still get up to $5,000 per door for new construction meeting Energy Star requirements
- 179D commercial energy deduction offers $5.80 per square foot for properties with construction starting before January 2023, exempt from prevailing wage requirements
- Qualified Production Property (QPP) allows manufacturers to expense up to 70% of facility costs with zero recapture if held 10 years—a permanent tax reduction
- 100% bonus depreciation is back for properties acquired and placed into service after January 19, 2025, creating immediate first-year tax benefits
- Properties purchased before January 19th still eligible for 100% bonus on improvements made after that date, though original purchase uses old rates
- One client discovered $30 million in overlooked 179D benefits on a 5.1 million square foot property that started in 2021
- QPP creates new manufacturing incentives by expensing facility costs without recapture, making production facilities extremely attractive for investors
- Cost segregation studies paired with bonus depreciation can generate immediate tax savings worth 7-10x the cost of the study
- Share this with business owners you know
Resources:
Request a FREE Cost Segregation Benefit Analysis https://aba.link/ka3
Learn more about CSA Partnershttps://csap.com/
Stop Overpaying Depreciation Recapture: The §1245 Move They Skip
Real Estate’s Biggest Tax Loophole: Cost Seg + 1245 Exchange Explained
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Full Episode Transcript:
Toby: Hey guys, Toby Mathis here, and today we’re going to go over four things that are coming outta the one big beautiful bill for real estate investors. Stuff that you may not be aware of a lot of it’s the energy stuff. Then we have this QPP, and then we have this huge thing with bonus depreciation. I thought let’s bring in an expert who does this stuff day in and day out. The best guy I know is Chris Street. Welcome back Chris.
Chris: Thank you so much, Toby. It’s always a good time.
Toby: Yep. Well, let’s dive in. Let’s go over, because there are some things that are going to go away in the first half of 2026 that people may not be aware of. Can we hit those first and then hit the one that nobody’s ever heard of because it didn’t exist until the one big beautiful bill. And then we can go over the one that everybody’s talking about, which is the bonus depreciation. But let’s start with the energy stuff.
Chris: Sure. As you may or may not be aware, all the things tied to energy from a tax incentive standpoint, were pretty much slashed. They’re not gone today. They’re also not gone in arrears, but they are seeing sunset. The date for all of these is June 30th, 2026, which is a construction start date prior to is still eligible. Anything after will no longer be and the two big ones were 179 D and 45 L. And the way to think about these from a legislative standpoint is these looked like expenses to the treasury because they were deductions and credits that were provided and to pay for some of the other benefits that we see in the bill.
These things go away, what they were and some of you may be relying on these or may have used them in the past, the 45L tax credit something that was very widely used and then had a couple of different elements that happened to it within different legislative bodies. It was an incentive to build houses because we have a shortage of houses. It was to builders single family homes or multi-family homes. What happened is in 2022 with the inflation reduction act, the benefit per door doubled.
It looked great, but the availability to get it became even harder because the stringent requirements, things like an energy star certification that required pre and post drywall approval. To get the full benefit, especially for the multifamily, you had to pay prevailing wages and apprenticeships, which is very rarely done because it is so expensive to do, paying the prevailing wages set up by the government.
Toby: Chris, what would you get? I’m a builder or I do a complete remodel and I have four units. Am I getting tax credits on these if I make them energy efficient?
Chris: For the 45L it’s mainly aligned to new construction. If you are a developer and building something new ground up on a single family, you could get as much as $5,000 a door tax credit. If you meet all their requirements for multi-family, it goes up to $2,500 a door. I want to bring up to people is that’s the current state of today and where things are high benefit, hard to get. But if you built these and it goes back years and even before 2022, and it was even easier to get, while the benefit isn’t as high, the requirements to get it are much less, but ground up construction per door tax credit for the builder.
Toby:bThis is a tax credit, it’s not a deduction. This is like getting cash, so up to $5,000 per unit, I could get cash in my pocket just by making it energy efficient, jumping through their hoops.
Chris: That’s correct. And they are there, there’s a lot of those hoops though. That’s the only caveat to call out.
Toby: Let’s not jump into all the hoops, but let’s just do the 10,000 foot view. Is it possible to qualify for this? Even if, if I come in and I gut a property, I have a 16 plex and I just gut the heck out of it and completely remodel it. I’m saying that because I’ve done this, is that something where I could actually be eligible for the tax credit or does it have to be ground up new bill?
Chris: It would need to be a ground up new bill for the 45L. The incent behind it was to say, we’re encouraging builders to build more homes so that way we could have more homes help stabilize the cost and to the consumer and provide the consumer more options. It was a tax credit for that, that purpose.
Toby: How about modular or anything like that? Does it have to be a new builder? Can it be something where I bring in a tiny home or something and put it on?
Chris: For those the hard part would be getting the full energy efficiency piece. For the energy efficiency, staying at 10,000, there is a couple of different energy star certifications that are out there. Energy star you’ve probably seen in buildings before, but that doesn’t mean it’s a full energy star certification for these residential properties specifically, it requires an inspection of the property to ensure it does have the appropriate energy efficiency. Which involves using the right type of insulation, the right type of air condition, the right type of lighting. Those typically don’t, you don’t find those in modular homes because they’re cost prohibitive. And it makes them hard to achieve that level of certification. You’re required to do that before the building’s drywalled and after. You could imagine the administration of that is very hard because you have to have somebody walk the property twice that becomes.
Toby: You need to be a builder. You need to be following along the lines of knowing that you’re doing this and there’s 5,000 bucks to be had and this terminates as long, as long as you’ve started the building by June 30th, 2026 then you could qualify for this and you can go back if you didn’t know this existed or you’re wondering, Hey, I built a bunch of units and I made him energy efficient, could I qualify? Reach out to Chris, I’ll put your information in the show notes so that somebody can reach out and determine whether this is something that they might be eligible for. I have so many folks that it’s the 179D and the 45L that they didn’t realize that they were eligible for. And they go back and they find a bunch of cash. A hundred thousand bucks found underneath the rock. They didn’t know that they qualified. Nobody told them, their accountants had no idea, but they talked to Chris and they, oh my gosh, I’m eligible for this program. You guys have done a great job for a few of our clients. Let’s bridge it over to the 179D is this same type of thing or you know, how are these two things different?
Chris: 179D is more on the commercial side where the 45L is more aligned to the residential side. 179D was produced to generate energy efficient commercial properties. This does also apply to residential multifamily that are four stories and above. A couple of things is 179D, the date’s exactly the same when it begins to sunset construction prior to that it is eligible. Prior to the inflation reduction act, the amount that you got per square foot and you got a deduction, not a credit. It is a little bit different, but it’s based on the envelope of the building.
Now the benefit that we had and still have with 179D is the requirements for the energy efficiency are not nearly as stringent as they are for the 45L. It’s based on a ASHRAE code, which if you want to have some fun go start to Google all the ASHRAE codes that are out there, but it’s based on a code that’s from the early 2000s that all state and local building codes have caught up to.
If you’re building a new building, you meet that code, you meet that energy efficiency, the question becomes the amount that I get, is it worth it? And since it is a square footage amount, the bigger the property, the bigger the benefit. We had a benefit sitting around a dollar 20 a square foot of a deduction for meeting this energy efficiency gain here. Now in the inflation reduction act came around in 2022, they took that from a dollar 20 and moved it up to $5 and 80 cents a square foot. The deduction balloon substantially, the only thing that was added to it, which is new and challenging, is the prevailing wages component. This is something that very few folks meet unless they’re in HUD development.
What is interesting though, going back prior years doesn’t need to be this year. Any building where construction started and was continuous prior to January of 2023, but going into service after that. You start building something in 2022, it’s ready in 2023, you have renters, it’s going, that property going into service that year is eligible for the full $5 and 80 cents a square foot without the prevailing wages and apprenticeships requirement, it is exempt from that. It’s an exemption that very few have capitalized on and is a quick deduction that can be done in tandem with a cost segregation.
Toby: If I’m doing multifamily and I’m doing five or six story apartment buildings. This is something that I should be looking at or if I’m just doing commercial non-residential, this is something I should be looking at. Could it be like warehouses, industrial, things like that, or does it have to be something where somebody’s going to live?
Chris: No, all the commercial properties align the ones where the people live. It’s just those ones over four stories. Other homes, buildings below three stories that are multifamily. They don’t apply, but it’s mainly for commercial. And yes, it should be something that you’re looking at. If we’ve seen that this is one of the most overlooked items, specifically the exemption item. We looked at a 5.1 million square foot where a cost segregation was already completed on it and it started in 2021 and it went into service in 2023. They were sitting on about a $30 million benefit and didn’t even realize it. And it was just completely overlooked because you never think about an exemption at the start date that you’re going to be applying at the end date. Yes, all those commercial properties are perfect for this type of solution.
Toby: Who’s your avatar on this? Somebody with a 10,000 foot building or above or like what’s the, what’s the sweet spot?
Chris: For those that might qualify for that exemption that start prior to 2023 in service into 2023, it’s actually higher. You want tp see somewhere in the range of 40,000 square feet. If there is no exemption, you really want to be closer to that 70, 80, 90,000 square feet and above because you’re only getting a dollar and $20-30 cents a square foot of a deduction. Even though we know the code is caught up and it’s going to and will pass the energy efficiency, there’s still filing requirements that you need to have. And it requires a professional engineer, conduct the inspection who has a professional engineering license in the state of the property. You could imagine how challenging that could be given that properties are all over the state and you gotta make sure you have a license specifically in that state. That’s what makes it cost prohibitive. It’s not something you could just go out and do easily, like a cost segregation.
Toby: Okay. I do want to get to the cost segs here and we want to talk to our friends that are all doing the single families and duplexes and fourplexes and stuff. Let’s shift gears a little bit. Before we get there, I’m going to give you guys the tease, we’ll get to the residential folks, but before we get there, let’s talk about the third one that the QPP and what is that and how it’s under the one big beautiful bill. I think this is new, right? What is it and how does somebody get a benefit out of it?
Chris: This was something that was introduced in the bill. If you think about the campaign season and really any campaign season, you always hear something to this degree, but there was a lot about bringing production on shore. We saw a lot of this during COVID too. When you think about us as a country, we have a production possibilities frontier. We can only produce so much, but if we add capacity that frontier expands. We heard on the campaign trail and part of a campaign promise as the Trump administration was, well, we’re going to incentivize people to build here to expand manufacturing capacity here. Inside of the one big beautiful bill, they created essentially a new asset class. QPP stands for qualified production property. What qualified production property set out to do is provide a tax benefit for real estate and development for adding new capacity of manufacturing and production.
That could be building a new facility or retrofitting a facility that maybe was a warehouse that you’re turning into a production facility and putting a lot of capital into it, expanding that frontier of our ability to produce what the high level of it, what it does is it says all property. This could be personal property, short life assets and long life assets. This could be walls, floors, everything. Anything that touches the manufacturing and production process can be expensed. Not deducted, expensed gone. And if you hold that property for 10 years, there is zero recapture on that expensed item. They are reducing your basis effectively for all things that are manufacturing production.
Toby: You expense it out, what’s the difference between expensing it and deducting it?
Chris: An expensed item versus a deduction is an immediate and permanent tax savings. That by the expensing, that it reduces the overall basis, which determines what you pay tax on every year. So you just cut it. The example I like to give with this is, let’s say you were somebody who did build a $10 million facility to make Tupperware. That facility was broken down into its component parts measured all dimensions of it. And it’s determined that 70% of that $10 million is a part of the production or manufacturing process. That means your basis goes down from 10 million to 3 million.
That’s $7 million in taxable basis that you have just wiped off of your book permanently for forever. The remaining 3 million, you can do a cost segregation on and deduct that amount, which will be a deferred tax gain for you year after year after year until you sell the property.You get the benefit of two things. Now the part that we’re still waiting on guidance is, when they launch bills like this and it happens every single time. Think of all the major milestone bills that we’ve seen over the last two decades. You have the Inflation reduction Act, you have the Affordable Healthcare Act.
There’s all these things that come out with really, really good ideas and really, really good intents. They say, okay, treasury, you go take care of this now. And the treasury’s like, well you didn’t define a lot of this. What we’re still waiting on guidance on, on qualified production property is what is production even state to state. There’s varying definitions about what constitutes production or manufacturing. Typically it’s based on what is produced in that state that gets the most benefit. It’s going to require some type of clarity around what that is.
What I’ve seen in the state and local site is we typically have a, have a requirement to see there be a material or physical change in a property, meaning it takes away material handling equipment, storage equipment. It’s really got to be those types of things. But we don’t know. What the IRS does is they will give us guidance. They will give us guidance three months from now, six months from now because they’re going to tell us how to administer this. And we of course are going to follow that guidance as if it’s law. But that is ultimately what CPP is and what we expect to see coming forward.
Toby: That’s very, very new. Let me go back to this just because I’m a little bit dense. I’m expensing in your example, you had a $10 million build. I’m taking an expense of $7 million that is not subject to recapture so long as I meet underneath the statute. I’m getting a $7 million deduction in that first year. But I don’t have to pay recapture on it when I sell.
Chris: You nailed it. That’s it.
Toby: Oh my God. That just hit me. And I’m like, wow. Okay. That would all be capital, by the way, if you sold it, then you’d have capital gains, but that’s a lot better than recapture at 25% or if it was ordinary income on 1245 property. Right?
Chris: That’s exactly right. And you know, I can tell by Toby’s reaction, it’s very lucrative and a lot of people want to do it. What you have coming out of the woodwork right now is a lot of people claiming manufacturing. Like one of the fun ones that popped out right away was, we’re a restaurant. We manufacture cheeseburgers, and everything that touches the production of that cheeseburger, we even do this, we do these for accountants, and we had a CPA firm and the managing partner goes. We manufacture tax returns, they’re figuring these things out and even what they do, what the IRS does in the treasury and these guidances, they start to exclude things. One of them, for instance, if you make food, but you also serve food in the same facility, you don’t qualify. If anybody’s listening from Frito-Lay, do not sell your chips at the facility because you could, you could be disqualified for QPP,
Toby: Hey, I’m going to take my restaurant and I’m going to manufacture the food in one half and I’m going to sell it in the other.
Chris: I actually think they have some stipulation around that, but perhaps maybe you create two different entities. Then you could, you could do the one se 179, some of those vehicles to transport others.
Toby: It’s not going to make money like it. It’s excluding it from CA, it’s just going to be capital gains instead of recapture. They always get paid. Let’s go to where everybody, most of the folks that listen are probably interested in the residential stuff and they’re like, okay, this sounds great, Chris. I love the energy stuff, but it’s not really applicable to me. I’m not a builder. The QPP sounds interesting, but I’m not manufacturing. What I do is I buy duplexes, plexes, single family residences, what’s in there for me?
Chris: Sure. All those other things are technical and exciting. But what to me is the most exciting is you guys exactly the ones who are investing in short-term rentals and single family residential homes. I think there is about to be a renaissance and a boom of these types of properties. Primarily because of this change in the bill, which you’ve probably heard described is 100% bonus depreciation being back now back implies that it was here before and it’s now no longer here, which is exactly what happened.
Why it’s so impactful is when you think of the history of bonus depreciation, it’s been around a couple of different times, but most recently, 2017 and 2022 with the Tax Cuts and Jobs Act, we got it. It was almost like getting us addicted to it, like an addictive substance and they weaned us off of it. And during that time, we had withdrawal, the real estate market did have withdrawal because it saw it slowly going away and it was challenging, but because it was known to be going away, it produced an inflated and surge demand leading up to the deduction, to the reduction of bonus depreciation.
Which is why we had so many transactions in 21 and 22. Now it’s back and it does not show any signs of going away. It’s permanent and tells something and a new law is launched. But what what this change is, if you haven’t dealt with bonus depreciation before, whenever you segregate assets and you want to accelerate depreciation, you have the opportunity to do that typically from a 27 and a half or 39 year down to a five year, which is a great benefit over the course of that five years or a seven year also a great benefit or a 15 year, all three of those are great benefits to start bonus depreciation is the Powerball.
At the end of that depreciation lottery that says, hey, you know what? Anything that’s accelerated, you get in year one. You pull it all forward, essentially calling it all a one year asset as a deduction is considered. That’s what bonus is here now for, and we have it somewhat in the perpetuity until something changes.
Toby: Here’s my prediction. If the market goes wayward and the real estate market gets hit, then they may say, hey, you know what? Right now it’s a hundred percent bonus depreciation is you bought the property and put it into service after January 19th, 2025. Otherwise you’re under the 40%, 60%, 80% whatever, depending on the year that you acquired the property and then put it into service. My guess is that they do the carryback again, if we run into issues, if we start seeing, like right now we’re kind of frozen in the real estate market, there’s not a lot of activity, especially in residential because people are sitting on their really low interest rates and they’re not incentivized to sell.
You want to get some incentives here for people to really get and start buying and maybe pay a little bit more and get, get the market ramped up again, as you say, if you buy it, you get depreciation, you create a loss, carry it back. They have done that twice I’ve seen in my lifetime that I’m aware of. And both times you just saw people jumping on that.
Chris: For sure and we do have an administration that looks, it’s very real estate focused. We need it, there’s still parts of the real estate market that are struggling. We’re seeing signs of, you know, things coming back in many, many ways. But there’s still a lot of challenges there. Some of those financial instruments and situations people have themselves in are going to produce challenges. And we’re already seeing that a little bit. More administrative relief or legislative relief would be welcomed.
Toby: But in the meantime, let’s go over some real life situations so that people understand what this means. Let’s say that I bought a property in 2023 and that I fixed it up and I put it into service in 2025. Maybe it took me a year and a half to get all the permits and to get some building done and I fix up a nice property, maybe it’s a plex, whatever. Am I eligible for a hundred percent bonus depreciation if I put it into service? Let’s say I put it into service in June or August of this year. Do I get a hundred percent?
Chris: Typically with bonus, the inservice year is the year you go off of. To start, anybody who did buy properties back years ago when bonus was at a hundred percent, they get that bonus depreciation at a hundred percent. It’s still eligible to them. They could get it right now without amending their return. The new law, this one has a little bit more of a different view of it in-service is still important. But that date of January 19th, which happens to be inauguration day, if you bought a property prior to January 19th, even if you put it into service afterwards, you have to go off the previous tax cuts and Jobs Act bonus depreciation numbers. So for 2023, the date of acquisition, that would be an 80% bonus depreciation number, so, not a full hundred percent. The silver lining that that individual gets, who is making those improvements? If you make any improvements and incur those expenses after January 19th, those expenses the improvements, those items are eligible for a hundred percent bonus depreciation. So yes and no.
Toby: Does it have to be non-residential? If I’m doing that, does it have to be the Airbnbs or commercial if I want the a hundred percent bonus on those for the improvements made after January 19th?
Chris: That’s for residential and commercial. If it is a commercial property or a short-term rental, you have an added benefit of something called qualified improvement property QIP, which Toby and I spoke about on another video that you can find out there. But those are specific assets that expand the scope of what you might be able to take. If you are in a commercial property situation where you buy an in-service property and then you make the improvements afterwards that just expands the list of things you can add to short life property that you wouldn’t otherwise be able to.
Toby: But otherwise, could I still do this if it’s residential? Let’s just use the example. I have a fourplex bought in 23. We will use the same timeline and I put it into service in mid 2025, but I did a lot of the bill, I was waiting on permits and they finally said he approved and then I did a big push at the end and I put $150,000 in it after January 19th. Would I be able to write that all off, in this year?
Chris: Not necessarily all but the portion which qualifies short life assets. All of those a hundred percent bonus depreciation.
Toby: What that means guys, is you reach out to Chris, here’s the easy one. If this stuff gets a little complicated, you get into the weeds, I’m not going to pretend like I know it all. What you want to do is talk to somebody who does it day in and day out and you gotta figure out what that 5, 7, 15 year property is. That would be a hundred percent bonus under that scenario. When it was actually incurred, when it was put into service. All those things are these moving dates. They have meaning and it’s not, I don’t want to try to learn it all. I just want to know that there’s an issue there and then let’s bring in the expert to see how much benefit I can get. And here’s the beautiful part with Chris and his group.
They don’t charge you to do that. They actually look at it, they do the analysis and then you can say, is the juice worth the squeeze? Right? This is how much it might be to do a cost segregation study and to have somebody actually break it down. But here’s the estimated benefit. Before you even walk in, this is how much money I’m going to put back in my pocket. Chris and I have done a number of videos together, plus his predecessor Eric Oliver did a great job. We have been talking about this stuff for years. We have worked with these guys, they have done tens of thousands of studies.
What’s really cool is when they give you an estimate, it’s usually conservative. Almost always they come back and they outperform. But what we always would look at is if I can spend a dollar and I could save myself seven bucks, I’m going to do it. There’s a huge amount of value and then it even gets better. We didn’t touch on it today just because it’s a topic for a different day, but 1245 exchanges, those are permanent tax savings. There are certain things that you look at and it’s like, this is dollars in my pocket, permanent tax savings.
If I could spend a dollar and save three, I’m doing that. But if I’m doing cost savings, it’s going to be whatever multiple makes it worth my while. And these are dollars in your pocket right now so that you can go out and do more investing. Chris, is there anything else you want to hit? We just hit four things that the one big beautiful bill changed out that real estate investors really need to know anything else?
Chris: Very well said on your end. I think the key thing with these is there’s bills, there’s uniformity in laws, but there’s no uniformity in people in their own individual tax situations.What we do like to do, as Toby mentioned, we’re very big believers in informed consent. We want to take as much information from you as possible and give you a lot of information back so you can make an informed decision. That informed decision is one that does not involve engaging to do a cost segregation, a 1790, a 45L anyone 1245 exchange. Then we are perfectly okay with that. We’re happy that you have the right information to go forward. So please let us know we can help. We enjoyed doing this and we like helping people save money and most importantly, improve the return on their investments.
Toby: Perfect. Well I’m going to put your other videos that we have done so that people could see about 1245 exchanges. They can learn about how to use the cost segregation to their benefit. I’ll put those videos in there. Hey guys, like and subscribe and share this with anybody that you know that might benefit. Thanks Chris.
Chris: Thank you Toby.
