H.R. 1 and the Real Estate Industry: What the One Big Beautiful Bill Act Means for Property Owners and Investors

H.R. 1 and the Real Estate Industry: What the One Big Beautiful Bill Act Means for Property Owners and Investors

Congress’s H.R. 1, also called the One Big Beautiful Bill Act, is reshaping the tax landscape for real estate professionals, developers, and investors. From bonus depreciation to pass-through deductions, the changes ripple across everything from small rental portfolios to large-scale development projects. Understanding these provisions—and how they interact with existing tax rules—is crucial for real estate owners who want to optimize returns and remain compliant.

Major Tax Changes Impacting Real Estate

• Bonus Depreciation: The Act allows 100% bonus depreciation for qualifying property placed in service after enactment, expanding eligibility to include used property. This creates powerful incentives for acquisitions and renovations, and cost segregation studies are especially valuable when 100% bonus depreciation is in place, often yielding significant negative taxable income in the first year, which can be used by real estate professionals to offset other income.
• Section 163(j) Interest Deduction Limitations: Business interest deductions are capped at 30% of adjusted taxable income, creating potential impacts for highly leveraged projects.
• Section 199A QBI Deduction: Real estate investors who qualify may deduct up to 20% of qualified business income from pass-through entities.
• Section 1031 Like-Kind Exchanges: The Act limits like-kind exchanges to real property only, eliminating personal property exchanges permanently. This rule has been in place since 2018, but does have implications for the sale of personal property related to real property traded in a like-kind exchange.

Who Wins and Who Loses

Owners of income-producing real estate generally benefit from the expanded depreciation rules and the 199A deduction, while developers and high-leverage investors may see reduced benefits due to interest limitations. The overall effect depends on ownership structure, financing, and whether activities qualify as a trade or business.

Practical Example

A landlord acquiring a multifamily building in 2025 can immediately deduct 100% of eligible property components under bonus depreciation—something not previously available. However, if that acquisition is highly leveraged, interest deductions could be limited, partially offsetting the benefits.

Action Steps

Real estate investors should work closely with their tax advisors to evaluate entity structures, financing arrangements, and depreciation strategies. Regular reviews ensure that each project is optimized under the new tax framework.

Tax reform isn’t one-size-fits-all. Let’s analyze how H.R. 1 specifically affects your portfolio and optimize your next filing season.

Disclaimer:

Pursuant to United States Treasury Department Circular No. 230, Regulations Governing Practice before the Internal Revenue Service, and the Statements on Standards for Tax Services issued by the American Institute of Certified Public Accountants, we must advise you that written tax advice contained in this email may not be relied upon to avoid any tax penalties. Should you require binding tax advice that may be relied upon to avoid accuracy-related penalties, you must request that from us and, to the extent we are able to provide such advice, we will provide it in an appropriate written form.