The new tax bill, “One Big Beautiful Bill Act” (OBBBA) that was passed on July 4, 2025 has changed a number of tax provisions and added some new ones as well. Included are changes that real estate professionals and firms will face along with housing market impacts. The OBBBA affects real estate professionals both directly and indirectly.

Pass-Through Deduction Now Permanent

One of the provisions within the new tax bill is to make the Qualified Business Income (QBI) deduction permanent. This deduction, also known as section 199A, originally allowed 20% of QBI to be deducted for any businesses classified as pass-through entities like LLCS, S-Corps, or Partnerships and was intended to sunset after 2025. However, the QBI deduction is now permanent and has increased to 23%. The importance of this as it pertains to real estate professionals and firms is that it will allow the rental and development income that those businesses generate to be taxed effectively at a lower rate. Investors will therefore become more willing to invest now that more money can be saved and earned due to the lower tax rate, especially for investors in higher-priced markets.

Bonus Depreciation and Section 179 Increases

Bonus Depreciation permanently returning to 100% provides a significant benefit to Real Estate Professionals. This upfront deduction was set to decrease by 20% per year between 2022 and 2027. However, due to the OBBBA bonus depreciation is set to go back to 100% on a permanent basis.

Section 179 allows businesses to deduct the full purchase price of equipment that meets certain qualifying conditions and is put into service during a tax year. Prior to the OBBBA the expense limit was $1,220,000 with a $3,050,000 phase-out threshold. The OBBBA moves the expense to $2.5 million with a $4 million phase-out threshold, and these will be adjusted for inflation starting in 2026.

Real estate professionals will benefit directly from these changes due to their impact on cost recovery through the immediate write-off of certain business assets. Real estate professionals who buy, renovate, and rent properties can also benefit because it will allow owners and investors to deduct a large percentage of the cost of equipment and other assets in the first few years.

State and Local Tax (SALT) Deduction Increase

The OBBBA increased the SALT deduction cap from $10,000 to $40,000 until 2030, at which point it is set to return to $10,000. The SALT deduction is one which allows taxpayers to deduct their state and local income, sales and real estate taxes from their income as an itemized deduction. In particular, for taxpayers living in high-tax states like California or New York, they will get additional relief towards what they owe the federal government because of this deduction. As an extra incentive to homebuyers, this could also prove to be beneficial to professionals in the business of buying and selling real estate.

Opportunity Zones Made Permanent

Opportunity zone programs were introduced to incentivize real estate investors and professionals to invest in and build properties in “distressed areas” or low-income communities. Although these programs were originally scheduled to sunset after 2026, the OBBBA has now made them permanent. Real estate professionals and investors can invest or build more properties to sell while enjoying tax benefits through deferred gains and potential basis step-ups over time.

Contact Us Today

The tax changes introduced by the One Big Beautiful Bill Act create new opportunities for real estate professionals while adding important planning considerations. Call us at 203-489-0612 to discuss how these provisions may affect your real estate business and investment strategy.

Written by: Tyler Goncalves