For real estate investors, the tax landscape has shifted once again, creating new planning opportunities that could influence purchasing decisions, financing strategies, and long-term investment returns.
At Rojas & Associates CPA, we believe tax planning is an ongoing process, not something that begins when it’s time to prepare a tax return. One of our goals is to keep clients informed as tax laws evolve, helping them recognize planning opportunities early enough to make informed business decisions before important deadlines pass.
The changes stem from the One Big Beautiful Bill Act (OBBBA), signed into law in 2025, which permanently restores several favorable tax provisions while accelerating the expiration of others. For investors who own rental property, commercial buildings, or investment real estate, the legislation signals that many tax strategies should be revisited before additional acquisitions or capital improvements are made.
One of the most significant changes is the permanent return of 100 percent bonus depreciation. Previously, investors were preparing for the deduction to gradually phase out over the next several years. Instead, qualified property placed in service after January 19, 2025, once again qualifies for full first year expensing, restoring a valuable tax planning tool for investors acquiring or improving real estate.
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While buildings themselves continue to be depreciated over their normal recovery periods, a cost segregation study may allow portions of a property’s purchase price to be reclassified into shorter lived assets eligible for immediate deduction. Items such as site lighting, parking improvements, flooring, certain electrical systems, plumbing components, and other qualifying assets can often produce substantial first year depreciation deductions while improving overall cash flow.
The legislation also reshapes how many real estate businesses calculate deductible interest expense. Beginning with the 2025 tax year, depreciation and amortization are again added back when determining the limitation on business interest deductions. For investors utilizing financing to expand their portfolios, the change generally increases the amount of interest that may be deducted each year.
That revision has also prompted tax professionals to revisit decisions made under prior law. Many real estate businesses elected Real Property Trade or Business status in previous years to avoid earlier interest deduction limitations. Those elections required the use of slower depreciation methods, making the permanent return of bonus depreciation a factor that could change the overall tax picture for some investors.
Another provision receiving considerable attention is the permanent extension of the Qualified Business Income deduction. The Section 199A deduction, originally scheduled to expire after 2025, remains available for many qualifying partnerships, LLCs, S corporations, and sole proprietorships. Rental property owners who meet the applicable requirements may continue benefiting from a deduction of up to 20 percent of qualified business income, making proper documentation of rental activity increasingly important.
Not every change expands tax benefits. Several federal energy related incentives are approaching expiration, including deductions available for qualifying energy efficient commercial building projects. Investors planning renovations or energy improvements may need to accelerate project timelines if they intend to preserve available tax incentives before construction deadlines pass.
Beyond the headline provisions, the legislation also affects several areas that frequently influence real estate investment planning. Updated limits involving excess business losses, expanded Section 179 expensing, differing state conformity rules, higher SALT deduction limitations, and ongoing considerations surrounding Opportunity Zones and like kind exchanges all contribute to a more complex planning environment for investors evaluating future acquisitions and property dispositions.
For many investors, these changes represent an opportunity to review existing tax strategies rather than simply react to new legislation. Decisions involving acquisitions, financing, improvements, and future property sales may produce different tax results than they did only a year ago. Working through those decisions before a transaction takes place often provides greater flexibility than attempting to address them after year end.
Notice: This information is not to be considered guidance, as each client’s situation is different. Contact Rojas & Associates CPAs a local and national firm, to determine how this directly impacts you.
Rojas & Associates are also a Real Estate Accountant
