On May 22, 2025, the U.S. House of Representatives narrowly passed the “One Big Beautiful Bill Act,” a sweeping tax reform package that could significantly impact the real estate sector. While the bill still awaits Senate approval, its current provisions offer insights into potential changes for property managers, investors, and homeowners.
Key Provisions Affecting Real Estate
1. Expanded SALT Deduction Cap
The bill proposes increasing the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for households earning under $500,000. This change aims to provide tax relief to homeowners in high-tax states, potentially making homeownership more attractive in these areas. However, the deduction phases out for incomes above $500,000, reverting to the $10,000 cap at $600,000.
2. Preservation of Mortgage Interest Deduction
The mortgage interest deduction remains intact and is made permanent under the new bill. This provision continues to benefit homeowners and could encourage home purchases, positively influencing the housing market.
3. Enhancements to Qualified Business Income Deduction
For real estate professionals operating as independent contractors or small business owners, the bill increases the Qualified Business Income (QBI) deduction from 20% to 23% and makes it permanent. This change offers substantial tax savings and could incentivize growth within the industry.
Moreover, the bill restores 100% bonus depreciation, allowing businesses to immediately deduct the full cost of qualifying property, such as real estate improvements.
4. Protection of Section 1031 Like-Kind Exchanges
The legislation safeguards Section 1031 like-kind exchanges, allowing investors to defer capital gains taxes when exchanging similar properties. This provision is crucial for real estate investors seeking to reinvest and expand their portfolios.
5. Opportunity Zones
The legislation renews and enhances the Opportunity Zones program, extending its benefits beyond 2027. This extension aims to stimulate investment in low-income and rural communities by providing tax incentives for investors. The bill also introduces broader information reporting requirements to ensure transparency and accountability in Opportunity Zone investments.
Implications for Real Estate Investors
-
Increased Investment Opportunities: The enhanced QBI deduction and restoration of bonus depreciation could attract more investors to the real estate market.
-
Affordable Housing Development: The extension and enhancement of the Opportunity Zones program may result in more affordable housing projects, offering investors opportunities to engage in community-focused developments.
-
Market Predictability: Making individual tax cuts permanent provides long-term predictability, allowing property managers and investors to plan with greater confidence.
Final Thoughts and What Comes Next
The “One Big Beautiful Bill Act” introduces tax reforms that could be game-changing for the real estate industry—offering enhanced deductions, preserving key investment incentives, and expanding support for affordable housing. For property managers and investors, this presents exciting opportunities to grow portfolios, reduce tax burdens, and meet housing demand in both high-tax and affordable housing markets.
However, it’s important to note that these changes are not final. As the bill moves to the Senate, amendments are possible. Stakeholders should remain attentive and informed about legislative developments that could reshape or scale back these provisions. Staying connected with trusted advisors and tax professionals will be key to making the most of these potential advantages and preparing for any adjustments ahead.
About Rentals America
Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management, and we’re here to help landlords navigate the rental market.
