What the 2025 Tax Law Means for Real Estate Investors

Note: This article has been updated to reflect the enactment of the One Big Beautiful Bill Act (OBBBA)

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, includes a host of tax changes that could significantly reshape how you plan, finance, and grow your real estate portfolio.

Whether you own rental properties, manage commercial spaces, or develop large-scale projects, OBBBA includes several favorable provisions that could work in your favor.

Key OBBBA Tax Changes That Could Affect You

Here is a breakdown of the tax shifts most relevant to real estate investors.

Full Property Write-Offs Are Back

One of the most attractive provisions for real estate investors is the return of 100% bonus depreciation. The OBBBA restores and makes permanent the 100% bonus depreciation for qualifying property acquired and placed in service after Jan. 19, 2025. Eligible expenses include the cost of qualifying renovations, property improvements, and certain building components. This is a game-changer for your 2025 renovation or development plans. And don’t forget the impact that a cost segregation study can have on your real estate expenditures, converting property subject to extended amortization periods to fully deductible in the year placed in serve.  

Bigger Deductions for Business Equipment

The OBBBA now raises the Section 179 deduction limit from $1.16 million to $2.5 million, with the phaseout threshold increased to $4 million. What does that mean for you? The increased limit provides greater opportunities to deduct the full cost of equipment, vehicles, or some property improvements upfront. The change applies to taxable years beginning after Dec. 31, 2024, and the limits would be indexed for inflation starting in 2026.

Favorable Interest Expense Deductions

For highly leveraged projects, interest limitation rules mean more of your interest expenses could be deductible (assuming the rules apply because the business has not elected out as a qualifying real property trade or business). Specifically, the 163(j) limitation will be computed without regard to deductions for depreciation, amortization, or depletion. This change is made permanent and helps reduce your overall tax burden if you’ve financed recent or upcoming projects with significant loans, effective for tax years beginning after Dec. 31, 2024.

Opportunity Zone Expansion

The OBBBA makes a number of modifications to the Opportunity Zones (OZ) program including elimination of the sunset date of Dec. 31, 2026, for new investments, establishment of a new system of redesignations every 10 years, a 5-year rolling deferral period for capital gains, basis step-ups, a 30-year gain elimination and enhanced benefits for investments in new Qualified Rural Opportunity Funds (QROFs). This could open new tax-advantaged avenues for development and long-term investment in underserved areas.

Larger Rental Income Deduction

If you earn net rental income through pass-through entities like LLCs, the OBBBA makes the Section 199A deduction permanent and retains the 20% qualified business income rate. The current phase-in of W-2 wages, capital investment, and specified services trades or businesses for taxpayers whose taxable income exceeds threshold amounts, is replaced and indexed for inflation for taxable years after 2025. That could mean more after-tax income, especially for those who qualify as real estate professionals.

Limits on Loss Deductions Made Permanent

The excess business loss (EBL) rule, which restricts how much non-corporate taxpayers can deduct in business losses each year, was scheduled to sunset in 2028, but the rule has now been made permanent. For 2025, deductible losses are capped at $626,000 for joint filers ($313,000 for others), and any disallowed amounts are carried forward as net operating losses, subject to additional limitations in future tax years.

New Write-Off for Industrial Buildings

A new, temporary 100% deduction for “qualified production property” is available for eligible costs related to the improvement or acquisition of some types of industrial or manufacturing real estate. Previously unavailable, this new deduction may create significant additional tax advantages for investors in logistics, warehousing, or production-related facilities. Qualified production property is defined as the portion of any U.S. nonresidential real property that is used originally as an integral part of a “qualified production activity.” Qualified production activity is the manufacturing, production, or refining of tangible personal property, if there has been a substantial transformation of the property comprising the product. Construction must begin after Jan. 19, 2025, and before Jan. 1, 2029, and the property must be placed in service before Jan. 1, 2031.

Estate Planning Flexibility Increased

For those planning to transfer real estate holdings or wealth to the next generations, the OBBBA increases the lifetime estate and gift tax exemption to $15 million beginning on Jan. 1, 2026, and indexed for inflation in subsequent years. The increase also applies to the generation skipping tax exemption. This permanent change offers more flexibility in passing along high-value property portfolios.

Want to Get Into the Weeds? If you’re looking for a deep dive into the full scope of the legislation, including technical details and specific tax code changes, check out the comprehensive analysis from our tax professionals.

What’s Not Changing

While the Act includes big wins for real estate investors, several areas were left untouched:

• Corporate tax rates remain unchanged.
• Carried interest rules were not revised.
• Some provisions of the TCJA, particularly those that had already expired, were phasing out, or were set to sunset soon, have been extended, preserving current planning advantages.

Smart Moves to Make Now That OBBBA is Law

Now that the OBBBA has been signed into law, proactive planning can help maximize its benefits:

• Talk to Your Tax Advisor: Work with your advisor to understand how the new law could impact your 2025 strategy, particularly in terms of purchases, financing, or restructuring.
• Revisit Your Investment Timeline: Now that 100% bonus depreciation is confirmed, adjust your timing of purchases or renovations to leverage these deductions fully. Also consider cost segregation studies for new real estate expenditures.
• Watch for New Opportunity Zones: Keep an eye on how new zones are mapped and where incentives are focused, especially if you’re exploring new markets. Rural and underdeveloped areas may become more attractive investment targets under the new framework.
• Consider Estate Planning Strategies: With the estate and gift and generations skipping exemptions raised to $15 million, now is an ideal time to revisit long-term plans for wealth transfer and family-owned real estate portfolios.

The Bottom Line

OBBBA brings long-awaited tax relief and opportunity to the real estate industry. From faster deductions and better financing treatment to new investment incentives, it’s time to take a close look at how these changes can strengthen your portfolio strategy.

Ready to protect your portfolio and plan for what’s next? Discover unique solutions from our real estate advisors who understand your needs.