On May 22, 2025, the House of Representatives passed H.R. 1, the budget reconciliation bill commonly known as the One Big Beautiful Bill Act (the Tax Bill). This legislation proposes significant amendments to the Internal Revenue Code that may greatly affect individuals and businesses in the real estate sector. The Tax Bill is now under Senate consideration, which means more changes could be on the horizon as it moves through Congress. Below are the core changes relevant to the real estate industry.
Key Points
- The Tax Bill seeks to make the Code Section 199A deduction permanent and raise it from 20% to 23%.
- It introduces an elective 100% deduction for certain nonresidential real property placed in service through 2032.
- Bonus depreciation is restored, allowing immediate expensing of 100% for qualified property placed in service between January 20, 2025, and December 31, 2029.
- Increased limits for deductible expenses could benefit real estate developers, raising Section 179 limits to $2.5 million.
- The Tax Bill extends the opportunity zone program with new designations effective through 2033, encouraging investment.
- It imposes increased taxes and withholding obligations on foreign investors from designated ‘discriminatory’ countries.
Content Summary
The One Big Beautiful Bill proposes transformational changes to key tax areas affecting the real estate industry. Among the notable updates is the permanent extension of the Qualified Business Income Deduction, which can provide sizable tax benefits to real estate investment funds. The bill also shifts towards 100% expensing for qualified production property in a major pivot from the current 39-year depreciation, promoting domestic manufacturing activities.
Moreover, it not only revises limitations on Section 179 expensing but also extends the tax benefits of Opportunity Zones, making it more enticing for investors to contribute to low-income housing projects. However, the Tax Bill increases the tax burden on foreign investors from specific countries, introducing new compliance requirements for real estate funds.
These provisions are likely to stimulate further development and investment activities in the real estate sector, despite presenting challenges for international operations.
Context and Relevance
This article is crucial reading for anyone involved in the real estate market or investment. As these legislative changes unfold, their potential impact on taxation, investment strategies, and compliance means stakeholders need to stay informed. This Tax Bill could redefine standards and best practices, especially concerning foreign investment in U.S. properties. If you’re in the industry, it’s time to pay attention!
Why should I read this?
Got a stake in real estate or funds in the game? This article covers the critical updates from the latest tax bill that could hit you or your investments directly. We’ve scoured the details for you so you can stay ahead of the game, whether benefiting from deductions or navigating new tax obligations.
