New Tax Law Targets Landlords with 50+ Rental Homes: Interest and Depreciation Deductions Eliminated

This legislation, dubbed the Stop Predatory Investing Act, aims to fundamentally change the business model for large-scale owners of single-family rental homes. Starting in the next tax year, any taxpayer—including corporations or aggregated business groups—who owns 50 or more single-family rental properties will lose the ability to deduct interest paid on loans for those properties. They will also be banned from claiming depreciation deductions, which account for the wear and tear on the homes. This is a massive shift in tax policy, directly targeting institutional investors who have rapidly acquired housing stock across the country.

The 50-Unit Line in the Sand

If you’re a "disqualified single family property owner," meaning you hit that 50-property threshold, the tax landscape changes dramatically. The bill is careful to prevent easy workarounds: if you own 25 houses and your business partner owns 25 houses, and you’re treated as a single employer under existing IRS rules (like Sections 52 or 414), you’ll be counted together and hit the 50-unit limit. This means the bill is aimed squarely at the big players, whether they’re organized as one giant corporation or several smaller, related entities. The properties covered are residential rentals with four or fewer units, but the rules are clear that townhouses and rowhouses count as separate buildings.

Where the Tax Breaks Go to Die

For most real estate investors, the interest deduction and depreciation are the two pillars of profitability. They allow owners to offset rental income, reducing their taxable burden. By eliminating both of these for owners of 50+ homes, the bill significantly increases their operating costs and tax liability. Think of it this way: if a large investor has a $10 million mortgage portfolio, they can no longer write off the $500,000 or so in annual interest payments, nor can they claim the standard depreciation. This isn’t a tweak; it’s a total overhaul that makes the investment far less profitable, potentially forcing these owners to reconsider their holdings.

The Exit Strategy Clause: Sell or Pay Up

There is one narrow escape hatch, and it reveals the bill's true intent: pushing these large owners to sell their properties to specific buyers. A disqualified owner can only claim the interest deduction (for the year of sale) or the depreciation deduction (only in the year of sale) if they sell the property to one of two groups. The first is an individual who plans to use the property as their principal residence—a direct boost to the owner-occupier market. The second is a "qualified nonprofit organization" dedicated to creating or preserving affordable housing, such as a community land trust. These nonprofits must commit to keeping the units affordable for successive income-eligible households for at least 30 years. Essentially, the bill uses the tax code to force large investors to liquidate their assets, but only in ways that benefit either individual homeowners or affordable housing initiatives.

What This Means for the Housing Market

This legislation applies to debt taken out in tax years beginning after it becomes law, meaning the impact will hit quickly. On one hand, the bill could achieve its goal of discouraging institutional investors from competing with individual homebuyers, potentially cooling certain housing markets. On the other hand, the sudden imposition of massive new costs on large landlords could lead to a rapid, forced sell-off of properties. If these sales happen too quickly, it could disrupt local rental markets, or, if the costs are simply passed on, lead to higher rents for tenants while the large owners try to manage the financial hit. The IRS has the job of creating the rules to prevent people from trying to duck under the 50-unit limit, which will be critical to the law's effectiveness.