When H.R. 1—better known as the Big Beautiful Bill—was signed into law on July 4, it didn’t rewrite every rule for real estate. If you own or manage rental properties, hold investments through a pass-through entity, or are planning improvements in 2025, now is the time to evaluate how these updates may impact your position.
Below are five key areas to review.
[Sec. 70105]
The Qualified Business Income (QBI) deduction—allowing eligible pass-through entities to deduct up to 20% of net income—was previously scheduled to expire in 2026. Under the Big Beautiful Bill, it is now permanent.
For investors holding rental properties through LLCs or S-Corps, this deduction continues to provide significant federal tax savings, assuming income and wage thresholds are met.
Recommended Action:
If you’re currently reporting rental income on Schedule E, it may be worth reviewing whether an entity structure could support ongoing QBI eligibility and reduce your overall tax burden.
[Secs. 70301 & 70306]
Full expensing of qualifying property remains in place. Investors may continue to take 100% bonus depreciation on certain improvements—including appliances, fixtures, and interior upgrades—placed in service during 2025.
Additionally, the Section 179 deduction limit has been increased to allow for expensing of up to $2.5 million in qualifying assets, subject to phase-out thresholds.
Recommended Action:
If you have recently completed—or are planning—capital improvements to a rental or commercial property, confirm whether cost segregation or grouped purchases may allow for full expensing this tax year.
[Sec. 70120]
The State and Local Tax (SALT) deduction cap has been raised to $40,000 for taxpayers with income under $500,000, effective through tax year 2029. This may allow high-income real estate investors in high-tax states to itemize again.
Recommended Action:
Evaluate whether your 2025 filings will benefit from itemizing, especially if you hold real estate in states such as California, New York, or Illinois. If you’ve defaulted to the standard deduction in past years due to the $10,000 cap, this provision may warrant a reassessment.
While the bill does not alter Section 1031 like-kind exchange rules, it does extend key provisions for Qualified Opportunity Funds (QOFs), particularly for rural zones and long-term investors. Enhanced basis step-ups and simplified compliance pathways are among the updates.
Recommended Action:
If you have unrealized capital gains and are considering deferral or reinvestment strategies, a QOF structure may be worth reviewing in light of the extended timelines and basis rules.
The bill restores the mortgage insurance premium deduction for eligible filers and expands access to Low-Income Housing Tax Credits (LIHTC), which may indirectly impact demand and funding for multifamily development projects.
Recommended Action:
If you are active in affordable housing or development financing, the LIHTC provisions may improve project viability. For rental property owners, mortgage insurance deductibility may reduce out-of-pocket tax costs if applicable.
Several key provisions affecting real estate remain unchanged under H.R. 1:
● Section 1031 like-kind exchanges are still allowed
● Capital gains tax rates remain the same
● Passive activity loss rules have not been updated
● Depreciation periods for residential and commercial property are unchanged
While the overall framework for real estate remains familiar, the Big Beautiful Bill introduces new variables worth planning for now.
The real estate provisions in H.R. 1 create meaningful tax opportunities—but many are time-bound. Bonus depreciation phases out, the higher SALT cap ends after 2029, and certain deductions sunset after 2028.
If you’re unsure whether your entity structure or current investment plans are aligned with these changes, now is the time to review them.
Accolade Accounting works with real estate clients to build proactive, tax-efficient strategies grounded in the current law. If you’d like to assess your position or plan for year-end, we invite you to schedule a consultation.
When it comes to reliable accounting services in Atlanta, GA, look no further than Accolade Accounting. With a highly experienced accountant team, we have assisted numerous businesses in developing and implementing effective accounting systems. If you need expert guidance, don’t hesitate to contact our certified public accountants, call 470-646-2663
