The “Big, Beautiful” Tax Breaks You’ll Get in 2025

0:00President Trump signed the one big, beautiful bill act into law on July 4th. And there are some huge potential implications for real estate investors. Tax code changes can be complicated. And there were numerous different versions of this bill that floated around before the final bill that passed in the House and Senate was actually finalized. So today we're going to break down what's actually in the bill and how it can save you money on your 2025 returns.

0:32Hey everyone, it's Dave. Welcome back to another episode of All in the Mode King. We're talking about President Trump's big, beautiful bill today. We're going to get into bonus depreciation, salt caps, pass-through deductions, and much more. These tax code nuances might not be the most exciting thing out there, but understanding them can absolutely increase your returns and really help your financial position. However, I am absolutely not a tax expert. So joining us today is Brandon Hall to help us unpack this whole thing. Brandon is a CPA and a real estate investor himself, and his practice is devoted exclusively to helping real estate investors optimize their tax strategies.

1:18There's a lot to dig into in the Big Beautiful Bill, so let's bring on Brandon. Brandon, welcome back to On The Market. Thanks for joining us here today. Thanks, Dave, for having me. I'm excited to be here. We are excited to have you on here to help us understand the tax implications for both Americans and specifically for real estate investors. Let's start big picture. Can you tell us at the highest level what's in this bill from a tax perspective? I mean, the main thing is that a lot of the 2017 Tax Cuts and Jobs Act, the Trump tax cuts, are now made permanent. So things like 100 % bonus depreciation, for example, is now permanent.

1:53So I would say that's the main crux of this bill. There's also a lot of other provisions in there as well. This bill also fixes some things that we're phasing out, so R &D tax credits, you can now retroactively apply those. Okay. So stuff like that. But that's the main takeaway, is that it's primarily making the 2017 TCJA tax cuts permanent and then adding a few things here and there as well. What was in the 2017 tax bill? What are we extending? And can you maybe tell us, because I think it's pretty important to know what would have happened if these didn't get extended as well. Yeah, well, if they wouldn't have gotten extended, a lot of these things were going to go away.

2:30So things like the estate tax exemption, 100 % bonus depreciation was already phasing down. So already in 2025, we were at 40%. And there was really no like it was going to go to 20 % next year, 0 % in 2027. And there wasn't anything to like, bring it back, right? So it's just going to be gone. The QBI deduction, the 20 % deduction on business income, that was phasing out. There's a ton of stuff. But I mean, the main thing for real estate investors is the 100 % bonus depreciation. Sometimes also the QBI deduction as well. The SALT changes, like that was$10 ,000. And that would actually have been probably a positive kickback at the end.

3:09But the end of this cliff, a lot of the provisions were expiring at the end of this year. So it's like a lot of tax planning was starting to happen. But now all of those provisions have been pushed back. OK, so let's break those things down. First, basically, is any of the tax brackets changing? Because I think that that was one of the main things, right, in 2017, like a lot of them got lowered. But that's changed. That's basically staying where it was from 2017. Yes. Staying where it was locked in. So no, in theory, no future changes. OK. All of this, by the way, is permanent until the next big tax legislation comes out.

3:47So we don't like when I say permanent, take that with a grain of salt. It's supposed to be permanent, but you can always change the law. So, yeah, the tax brackets, they're all still going to be the same as they have been in recent years. For the average American, then, are they going to feel the impact of this? Because I think a lot of the proponents of this bill are saying that this is going to stimulate the economy. Right. And so I'm just curious, like, is this going to put more cash in the average American's pocket? I would say this can help. I don't think it's necessarily going to hurt. I think it is going to help.

4:19But I will say that it's definitely going to help people that are running businesses or investing in real estate. It's essentially wealthier people, more so than the average Americans. I will say that. That's my belief. Now, again, my belief might change once I see some of the scoring come out. OK, cool. So specific things that are going to help the average American. This bill was, in my professional career, uniquely focused on families. So they expanded a lot of family credits, such as the employer-provided child care credit, the credit rate increased. The refundable adoption credit, the amount that you can get refunded, increased.

4:57The enhanced dependent care credit, the exclusion amount, is increased. The enhanced child independent care tax credit prior to TCJA, I think it was$1 ,000. Now it's$2 ,000 per child, and that's going to be retained, right? So it's a lot of things that are focused on giving back to people that have families. There's the new MAGA account, which is, you know, depending on your political ideology, may be good, may not be good. But the new MAGA accounts, it's a tax credit that you receive, much like a Roth IRA. You would kind of report on your taxes that I opened up an account for my child. I added$1 ,000 to it.

5:36And now I get$1 ,000 credit from the government on my taxes as a result of making that investment for my child. So those are going to be in play, I think, starting in 2026. So a lot of like family focused things that I do think will help anybody that has families. Maybe you could just explain, this is like tax 101, but explain the difference between a tax credit and a tax deduction because tax credit's better, right? That's what you want. Oh, yeah, yeah. Tax credit's definitely better. So a$1 ,000 tax deduction is a deduction from my income and tax is then calculated on my income. So if my income is$10 ,000 and I get a$1 ,000 deduction, then my taxable income is$9 ,000.

6:18Tax is figured on that. So let's say it's 20%. my tax is$1 ,800. Now, without the deduction,$10 ,000 of taxable income times 20 % of tax would be$2 ,000. So the$1 ,000 tax deduction puts$200 back into my pocket. So that's the benefit of it. Now, a tax credit is you had$10 ,000 of income,$2 ,000 in taxes, but now you get a$1 ,000 tax credit, meaning that your tax is only$1 ,000. So my tax was$2 ,000, but I get a$1 ,000 credit. So now I only have to pay a thousand bucks. So credit is a one for one, dollar for dollar. A deduction is whatever the deduction amount is multiplied by your marginal tax bracket.

7:01Well, it just sort of underscores for everyone listening to like do the math on these things and not just like assuming like, oh, I get a tax credit, like figure out what it actually means. Because just as a comp, right, we have the mortgage interest tax deduction, which really does add up to a lot of money. At least when I've run it for my own personal residence, like that saves you quite a lot of money, especially upfront in your mortgage when you're paying predominantly interest. That could be a really good thing. So just do the math. We are in an age where AI creates content and people just post the content, okay, up to the highest office.

7:39So it doesn't really matter who's saying what at this point, you really have to understand that AI is such a big part of everybody's content creation process now that you really should be asking, how do I know this is true? You just have to be careful. It's actually crazy. Yeah, no, it is really a little scary. So you need to be careful. It obviously will get better, but double check it. Yeah, I totally agree. But let's talk about QBI because I think that's one of the coolest things available for real estate investors that I don't hear people talk about it very much. Can you tell us a little bit about it?

8:16Yeah. So the QBI deduction is the Qualified Business Income Deduction. And basically for every dollar of business income that you generate, you get a 20 % deduction on every dollar. You don't have to jump through any hoops. If you generate like$100 ,000 of business income and you get the QBI deduction of$20 ,000, then you get to pay taxes on$80 ,000 of business income. Now there are rules as it pertains to real estate. So the real estate has to be a real trader business. And there's a whole set of subset. There's a whole subset of rules that go through what exactly this is. There's participation standards as part of those rules.

8:50You cannot be an SSTB, just specialized service trader business. So an accounting firm, for example, can't qualify for something like this. There are also phase out limits in terms of income. So real estate investors that have been doing this for a while, sometimes find that they can't actually qualify for the QBI deduction because they make too much money. And And that's a reality for a lot of real estate investors too. So if you're just hearing about this and you're like, why is my account never told me? It's probably just because you've been phased out. There's not much that you can necessarily do to fix that, potentially.

9:20Yeah, that's disappointing though, because my understanding was the whole idea behind this was to sort of equalize the cuts that were given to large corporations. Like C-Corps were getting this big tax cut in 2017. It was like, oh, the small businesses, sort of like this was the way to equalize that, right? Wasn't that at least the logic behind it? Yeah, yeah. And I would say that actually worked out pretty well. So the whole idea was the QBI deduction being 20%. We've got the lower corporate tax rate. That's going to prevent business owners from just flipping their businesses over to corporate taxes, right?

9:53So making themselves a C corporation to benefit from that lower tax rate. I would say it largely accomplished that purpose. So business owners have been claiming this QBI deduction. It passes through. It works really well. And real estate investors, I guess, can still claim it. But most real estate investors, I'll amend my prior statement in that there is an income phase out. However, the main reason that real estate investors don't really benefit from this is because most real estate investors are using bonus depreciation to create large tax losses. Thus, there is no business income for QBI purposes coming from their real estate.

10:27but if you can create income from your real estate then you can absolutely check out qbi and potentially use some of that as well yeah because i was thinking about like a flipper right would would it qualify for this like if you had a flipping business um and you're not because then you're probably not getting bonus depreciation right so you're you're flipping it and it's normally would be treated as ordinary income or passed through an llc but you might be able to use this for that kind of thing yeah yeah most businesses qualify uh except for those specialized service trader businesses. Real estate agents, I believe at one point were categorized as SSTBs, but they've got a great lobby and they were eventually stripped out of that, I believe.

11:03But business, yeah, absolutely. Flippers, definitely. All right. Well, let's turn to the big topic, which of course is bonus depreciation, but we do need to take one quick break. We'll be right back. Do you ever notice how every passive investment somehow turns into a very active lifestyle? Active spreadsheets, active phone calls, active stress. Here's a better question. What if you could buy brand new construction homes, 10 % below market value, in the best markets across the country, without making real estate your second job? That's exactly what Rent to Retirement does. They're a full-service, turnkey investment company handling everything for you.

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13:42welcome back to on the market i'm here with accountant cpa tax expert for real estate investors brandon hall we were talking about the new one big beautiful bill act that just got signed by president trump into law over the past weekend we've talked a little bit about high level what the tax bill has what it doesn't for real estate investors i think the main thing most people are looking for is bonus depreciation. Brandon, maybe just give us a little background. If people haven't listened to previous episodes you've been on, what is bonus depreciation? Bonus depreciation has existed for a long time.

14:17In 2017, the 2017 TCJA increased bonus depreciation from 50 % to 100%. And then there was a phase down that was starting in 2023. So in 2023, three bonus depreciation would drop from 100 % to 80 % 2024. It would be 60 % 2025. This year, it's 40%, 20 % in 26, and then 0 % in 2027. So basically from 2017 to 2022, you could buy real estate and benefit from 100 % bonus depreciation. Now, the way that this actually works is first you have to get a cost segregation study performed because when you buy a property, there are components of the property that don't last 27 and a half years or 39 years in the event of commercial property.

15:05And that's when, when, how long properties typically depreciated, right? So I buy a million dollar property. Uh, I have to allocate value to land. Dirt does not fall apart over time. And that is what ultimately depreciation is meant to track is the deterioration of your components over time. So I buy a million dollar property, uh, 20 % is land, which is 200 K. So I push$200 ,000 out of this depreciation bucket. I'm left with$800 ,000. If it's a residential property, I do$800 ,000 divided by 27 and a half. That's my annual depreciation expense. If it's a commercial property, I do$800 ,000 divided by 39 years.

15:40That's my annual depreciation expense. What a cost segregation study does is it says, hey, you bought a million dollar property. You push$200 ,000 out to land. You're left with$800 ,000. But the reality is, is that there's a lot of components inside this building that make up this building that are not going to last 27 and a half or 39 years. So let's identify those components and let's depreciate them over a faster time period. And the result of a cost segregation study is that you get these value allocations to five-year schedules, seven-year schedules, 15-year schedules, and then the remainder is still in that 27.5 or 39 years.

16:24And when you do a cost segregation, depending on the building type, you can generally expect to see 20 % to 30 % of the value be allocated to 5, 7, and 15-year property. So it's highly advantageous, right? Like if I were to allocate, just to make it simple, well, now we're gonna make it simple, I'm gonna have to pull up the cockpit. Not simple enough to do it in your head. If we were to allocate, let's actually try to keep it simple. So let's say of the 800K, $270 ,000 gets allocated to five-year property. Okay. All right, so$270 ,000 over five years is$54 ,000 a year. Okay. All right. And if you've got any accountants listening to this, I know that there's accelerated depreciation, but I'm just trying to keep it simple.

17:11Yeah. Just an example. Lay off them. $270 ,000 allocated the five-year schedule. Now you have$270 ,000 being depreciated$54 ,000 a year for five years. Now, if you didn't do this reallocation, the$270 ,000 is depreciated over 27 and a half years. So you get$10 ,000 a year. So you get$10 ,000 a year for 27 and a half years, or you can get 54K a year for five years. Now, do net present value calculation, time value of money. Most of the time, you're going to want to get the 54K for five years. So that's why cost segregation studies exist. We are accelerating the recognition of depreciation. And because we get a larger deduction, 54K versus 10 for five years, we get larger tax savings that we can then go reinvest and increase the snowball of the wealth building or the wealth building snowball, right?

18:05Yes. So 100 % bonus depreciation, that's where this comes in, applies to all components with a useful life of less than 20 years. Now, I just said on an 800K building, you'd expect 20 to 30 % of the value to be allocated to five, seven and 15 year property, which is all less than 20 years. Thus, it all qualifies for bonus depreciation. So where we just kind of went through this example of$270K for this$54K per year for five years. Now it's$270K in year one. And that's the power bonus depreciation. So now I don't have to take it over five years. I get it all today. That's incredible. Whatever allocation I can make to five, seven, seven, and 15-year properties.

18:45So cost segregation studies, the value of them skyrocket. I have a few questions about this. So I think the first thing everyone needs to know is that this basically just got extended, right? It was phasing out over time. And is in the new bill, Well, Brandon, is it getting phased out again or is it just continuous 100 % indefinitely? 100 % indefinitely. No phase outs. It's there forever until somebody needs to pay for and they need to knock it down. OK, got it. And they rewrite the law. And does every kind of real estate investor benefit from this or do you have to be a real estate professional?

19:18You do not have to be a real estate professional, but if you are a real estate professional, you will receive more benefits in the context of I get the tax savings today and I get to realize the full extent today. But if you're not a real estate professional and if you're not running the short-term rental loophole, which is all over social media now, 100 % bonus depreciation can absolutely help you. You just have to be a little more strategic about it, right? So the reason that you have to be a little more strategic is because bonus depreciation ultimately creates losses. So what Dave kind of jumped to was real estate professional status to use the losses.

19:52If you aren't a real estate professional and if you can't otherwise make the losses non-passive, then the losses created from investing in real estate are going to be considered passive losses. And passive losses can only offset passive income. A lot of real estate investors, especially when they're starting out, don't have passive income. My W-2 income is not passive because I'm materially participating in that. My business income is not passive because I'm materially participating in that. So we don't really have passive income sources. Interest, capital gains, dividends, all that is also considered not passive.

20:21I know that sounds weird, but that's how the law is written. The whole purpose of these rules is to prevent rich people from using rental real estate to offset the regular income. So it kind of starts to make sense in that context. So if you use 100 % bonus depreciation to create large tax losses, you got to ask, can I use the tax losses? And if the answer is no, I can't because they're passive, you don't lose them. They get suspended on your tax returns and they can be useful at some later point. Like if I want to go sell a rental, for example, the gain on sale is considered passive income. So it flows through to this calculation where it would unlock those losses that have been suspended and are passive.

20:58So I get flexibility in the sales decision. I don't have to do a 1031 exchange. I can just sell. I did that this year, actually, personally. So you don't totally lose the benefits, but it's definitely not as optimal as being able to claim everything right now for most people. And how much does one of these segregation studies usually cost? Oh, it depends. It really depends. Let me run through the different levels. So there are$500 DIY software options. You have to plug everything in yourself. I always recommend that you buy the audit insurance. It's probably an extra 150 bucks. Some of them include it.

21:33But buy the audit insurance. And that's an option. The next level of option is to do like a virtual site visit. So you would kind of, you would get on with a professional and the professional would tell you to walk around the property, take pictures of certain manufacturer tags on the different pieces of equipment that you have and map things out and stuff like that. So you're doing the virtual video walkthrough. Somebody on the other side of Zoom is recording everything for you, and then they're going to go perform the study by hand. And then you have the higher end studies where they will fly somebody out to your property and walk it.

22:05At the end of the day, the answer is it depends on your risk tolerance. So we have been the beneficiary, I guess. All of our content has kind of come back to us in a very positive way in the sense that real estate investors that didn't want to bite on our like tax planning engagements, they go use somebody else, but they eventually circle back around to us when they're getting audited. So we can still help them in a roundabout way. And we have successfully defended the software studies, the virtual studies, and the real studies. I will tell you that the real studies, the big ones where they walk through your property are pretty much just pushed through at the IRS office.

22:42The software studies are always challenged. The virtual studies are challenged a lot as well. Now, it doesn't say that anyone's necessarily more or less or better or worse. Well, the big studies are definitely more comprehensive and that's in their higher trust and I guess in the auditor's eyes. And so all that means is that if you go downstream, when you get audited, you'll probably be paying for it at that point in stress and money. And how long do they take if someone wanted to do something like this? Oh, I mean, you can get really fast turnarounds like the DIY stuff's instantaneous. Full study.

23:12I mean, once they do the walkthrough, it's probably 48 to 72 hours to really get it all into their system and push out a report. Okay. So that's bonus depreciation. Or did I miss anything else there, Brandon, that do you think folks should know? I just want to reiterate that industrial piece is if you're the operator of some sort of production-based business and you are using an industrial warehouse or even a portion of that, that portion allocated to your business can be fully expensed under 100 % bonus. So there's no like, there's no 39 year component to that anymore, which is fascinating. Yeah, it's very interesting.

23:48Very interesting. All right. We do have to take a quick break, but we'll have more with Brandon and the One Big Beautiful Bill Act right after this. Finding a strong rental property usually takes time, research, and calculated risk. Lenar Investor Marketplace helps simplify all of that. With a free account, investors can browse new construction homes built for rental potential alongside real-time data showing estimated returns, expenses, and local market insights. It's all in one dashboard, making it easier to compare opportunities and move when the right deal shows up. Go to biggerpockets.com slash Lennar to create a free account and take a look.

24:27That's biggerpockets.com slash L-E-N-N-A-R. Sign up for free and start exploring this smart investing opportunity today. Please consult your own legal and tax advisors to help evaluate the risks of any real estate transaction, Lennar is an equal housing opportunity builder. Tax season reminder for all the real estate investors listening. If you own rental properties, short-term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about cost segregation. It's an IRS-compliant strategy that lets you accelerate depreciation on your properties, which means you're paying less in taxes this year and keeping more cash in your pocket for your next deal.