Treasury Considering Extension of Bonus Depreciation: What It Means for Real Estate, Proptech, and Venture Capital
A potential expansion of bonus depreciation for certain existing real estate investments could improve cash flow, accelerate capital expenditures, and reshape investment trends across real estate technology and adjacent sectors.
The U.S. Treasury Department is considering whether to extend bonus depreciation to certain existing real estate investments, a move that could deliver meaningful tax relief to property owners navigating one of the most challenging capital markets environments in more than a decade.
The debate centers on whether owners should be allowed to accelerate deductions on qualifying improvements and components tied to already-owned assets. While technical in nature, the decision carries broader economic implications, particularly for sectors tied closely to building upgrades, energy retrofits, and operational modernization.
At stake is a provision that once allowed investors to immediately deduct 100% of qualifying capital expenditures. That benefit has been phasing down since 2023, reducing the immediate tax advantages that previously boosted after-tax returns on improvement projects.
If Treasury opts to expand or clarify eligibility for certain existing investments, the effect would be felt well beyond accounting departments.
A Liquidity Release Valve
Commercial real estate transaction volumes have fallen sharply since interest rates began rising in 2022. Refinancing pressure, tighter lending standards and declining asset values have left many owners focused on preserving liquidity rather than reinvesting in portfolios.
Accelerated depreciation changes that calculus.
By allowing faster tax write-offs, owners improve short-term cash flow and internal rates of return on renovation and repositioning projects. In practical terms, that can mean more capital allocated to:
Energy upgrades
Building systems modernization
Tenant improvements
Technology integration
For apartment, industrial and hospitality operators facing margin pressure from insurance, labor and compliance costs, enhanced depreciation could serve as an incentive to move forward with delayed projects.
“It doesn’t create demand out of thin air,” said one industry executive. “But it changes the timing of capital deployment.”
Spillover Into Real Estate Technology
The secondary effects could reach venture-backed real estate technology firms.
Over the past decade, investment in property technology—often referred to as proptech—has grown significantly, expanding from niche startups into platforms serving institutional owners. In 2025, global investment in real estate technology totaled roughly $16.7 billion across 481 companies, according to industry data, up nearly ninefold from a decade earlier.
Yet funding has become more selective. Venture investors have shifted toward business models tied directly to asset performance, regulatory compliance, and operational efficiency rather than speculative consumer marketplaces.
An extension of bonus depreciation could reinforce that shift.
Technology providers that benefit most from capital expenditure cycles—energy management platforms, construction analytics tools, compliance software, and asset-level financial systems—would likely see increased demand if owners accelerate improvement plans.
Energy and electrification platforms stand out as potential beneficiaries. Many retrofits require significant upfront investment, with returns calculated over several years. Accelerated depreciation enhances those economics.
Similarly, software that tracks capital projects, monitors building systems or supports due diligence during acquisitions could gain traction if transaction activity improves.
A Signal to Capital Markets
Beyond individual assets, the Treasury’s deliberations may send a broader message about federal policy direction.
Real estate accounts for a substantial share of U.S. private investment and employment. With office valuations under pressure and refinancing risks looming in several sectors, policymakers face growing calls from industry groups to ease capital formation constraints.
Extending depreciation benefits would signal continued federal willingness to support real estate investment even as monetary policy remains tight.
That signal matters for institutional capital allocators. Private equity real estate funds, structured credit vehicles and sector-focused venture funds all respond to changes in after-tax return assumptions.
If underwriting models improve, risk premiums may compress. That could translate into increased fundraising activity for real estate-adjacent investment strategies.
Limits and Open Questions
Key details remain unresolved.
Treasury would need to define:
Which asset classes qualify
Whether benefits apply only to certain types of improvements
How the provision interacts with existing energy and infrastructure tax credits
The behavioral response of owners also remains uncertain. Some may use the relief defensively, preserving balance sheets. Others could deploy capital more aggressively to reposition aging portfolios.
Economists caution that tax incentives alone cannot reverse structural challenges in sectors such as office. But for segments with durable demand—multifamily housing, industrial logistics and hospitality—improved tax treatment could accelerate modernization efforts.
A Cycle Shaped by Policy
Real estate has historically moved in cycles influenced not only by interest rates but also by tax policy. The expansion of bonus depreciation in 2017 coincided with a surge in improvement spending and portfolio upgrades.
The current environment is markedly different. Higher financing costs and stricter lending standards have tempered enthusiasm.
An extension would not mark a return to the exuberance of 2021. Instead, it could support a more measured phase of capital deployment focused on operational efficiency, sustainability and margin protection.
For property owners, the immediate question is how quickly clarity emerges from Washington.
For venture investors and technology companies tied to the built environment, the larger question is whether policy-driven liquidity can help catalyze the next phase of modernization in an industry long criticized for slow adoption.
In a market defined by tighter capital and disciplined underwriting, even incremental improvements in after-tax returns can reshape investment behavior.
Treasury’s decision, though technical on its face, may carry implications far beyond the tax code.
