What the “Big Beautiful Bill” Means for Real Estate Owners

Passed: July 4, 2025 | Effective Immediately

The tax landscape for real estate has changed dramatically. The One Big Beautiful Bill Act—formally passed by Congress and signed into law on July 4, 2025—delivers sweeping tax reforms with big implications for property owners, developers, and investors.

Here’s what you need to know:

100% Bonus Depreciation Reinstated

Applies to qualifying assets acquired after Jan 19, 2025 and placed in service before Jan 1, 2030.This includes HVAC systems, fixtures, and other property components. Owners can immediately deduct full costs, boosting early-year cash flow.

Increased QBI Deduction

The Qualified Business Income deduction for pass-through entities is now permanently increased from 20% to 23%.Effective tax rate drops to 28.49% for real estate pros and STR (short-term rental) operators.

Expanded Section 179 Expensing

The deduction cap is raised to $2.5M, with phase-out starting at $4M—ideal for equipment and leasehold improvements.

EBITDA-Based Interest Deductions Return

From 2025–2029, interest deductions can be based on EBITDA instead of EBIT.This supports higher leverage—especially beneficial for value-add and development projects.

Qualified Opportunity Zone (QOZ) Extension

Extended through 2033 with new rural incentives, including a 30% basis step-up after five years. Rural and tribal areas are positioned for major capital inflows.

Low-Income Housing Tax Credit (LIHTC) Expansion

• 9% LIHTC allocation increased by 12.5% (2026–2029)

• 4% threshold lowered to 25%

• DDA status expanded to tribal and rural zones

SALT Deduction Cap Increased

The State and Local Tax (SALT) deduction cap rises to $40,000 for incomes under $500K (2025–2029), phasing out above that.Especially impactful for real estate owners in high-tax states.

Mortgage Insurance Premiums Deductible Again

Reinstated deduction saves qualified property owners an average of $2,364/year.

Solar and Energy Efficiency Credit Extended

Home and building efficiency upgrades (e.g., solar panels, insulation, HVAC) remain eligible for a 30% federal tax credit through Dec 31, 2025.

Strategic Considerations

With many of these tax benefits being time-sensitive, working with an experienced commercial real estate advisor has never been more valuable. From identifying properties that qualify for bonus depreciation and QOZ incentives to structuring deals that optimize the new 23% QBI deduction, we help our clients stay ahead of the curve. Whether you're navigating rural development opportunities, leveraging tax credits, or repositioning assets in high-tax states, we align your investment strategy with today’s evolving tax landscape to help you maximize returns and move with confidence.