2025 Tax Changes

Real Estate Taxes

Real estate investors in particular stand to be significantly affected by the TCJA’s potential expiration in 2025, as changes to 100% Bonus Depreciation, Qualified Opportunity Zones, interest deductions, and estate tax exemptions could raise their costs, reduce their tax benefits, and alter their long-term investment strategies.

Tracking

• The Senate made some solid changes to QOZs, and of course, made them permanent. QOZ’s now get a Basis Increase every few years. The intent is to continue building the program. There is a lot to unpack here, but I’ll try to summarize.Basis Increase for years of investment:Years 1-3= 1% Step up Years 4-5= 2% Step up Year = 3% Step Up.In the 7th year, you are required to realize the initial gains invested (just like the current plan). And QOZs have a rolling tranche every 10 years, which means it’s not a tap that turns off and gain relies on Congress.
• The Senate's version of the tax bill would make 100% bonus depreciation permanent.
• Current proposed legislation would reinstate 100% bonus depreciation for a five-year period, with the final year being 2029. However, this benefit only applies to assets that are both acquired and placed in service after January 19, 2025. It is also worth noting that the Senate is currently considering whether to make this provision permanent.
• The first full draft of the tax bill includes the return of 100% Bonus Depreciation (assuming it survives markup).
• On February 25, The House passed a Republican budget resolution further pushing the return of 100% Bonus Depreciation.

Individual Taxes

Many real estate investors and other taxpayers benefit from the individual tax provisions in the TCJA, most of which are slated to return to their pre-2018 rules if no legislative action is taken.

Tracking

• The Senate's Version: No Tax on Tips - They followed their own original bill and made the deduction of $25k (double for MFJ). This also phases out at $150k. And it stays in through 2028. No Tax on Overtime - This is only up to $12.5k (up to $25k for MFJ) and stays in through 2028. SALT Cap - The Senate responded to the House with $10,000, a place to start negotiations.
• What’s In the 1st Tax Bill Draft?: - Lower individual tax brackets - Standard deduction increased by $2,000 - Child Tax Credit bumped to $2,500 - QBI deduction made permanent (and raised to 22%) - Estate & Gift Tax exemption increases, made permanent - AMT exemption and phaseout threshold increased - Itemized deduction limits permanently removed
• The House passed a revised budget that significantly increases the scope of tax cuts while drastically reducing required spending cuts, potentially adding trillions more to the national debt. Compared to the February version, the new budget allows for permanent extension of the 2017 Trump tax cuts.
• House Ways and Means Chair Jason Smith announced that House Republicans aim to pass a party-line budget bill with tax cuts and deliver it to President Trump by Memorial Day.
• The House has passed a budget resolution that could lower individual tax rates if it makes it through the Senate.

Business Taxes

Multiple provisions impacting businesses are scheduled to expire or phase out with TCJA.

Tracking

• According to the Senate's version of the Bill, R&D expensing will come back and is permanent. They are also allowing for small taxpayers ($30M in gross receipts) to go back and claim the capitalized expenses.
• Senate's version: Interest Expensing Flexibility(§ 163(j) ) is also PERMANENT. This allows way more expensing of interest and is way more friendly. Right now, interest is limited by 30% of EBITDA, which means you have a lower threshold, and interest is harder to deduct.
• Senate's version: § 179 Expensing didn’t change from the House version and is very beneficial. The threshold has increased to $2.5M & the phaseout doesn’t start till $4 M.
• Senate's version: QSBS also got a boost from $10M of gain excluded, to $15M of gain exclusion. This is a pretty big boost, and it’s inflation-adjusted.
• The Senate kept the Qualified Business Income Deduction permanent and left it at 20% versus the increase to 23%
• Under current law, EBLs become NOLs (net operating losses) that can offset up to 80% of future income. But based on the House and Senate's draft, EBLs would instead go back into the tax calculation the following year, changing the timing and strategy around NOL utilization.

Tariffs

Trump has consistently championed tariffs as a way to protect U.S. industries and pressure trading partners into more favorable deals. No comprehensive policy paper or platform detailing specific rates, targets, or exceptions has been released.

Tracking

• On April 9, President Trump announced a 90-day pause on reciprocal tariffs for the majority of U.S trading Partners, not including China.
• On April 5, the 10% baseline tariff went into effect.
• On April 3, the 25% tariff on foreign made cars went into effect.
• On March 12, the 25% tariff on global imports of steel and aluminum imports to the U.S. went into effect.
• On March 6, President Trump expands his one-month exemption, allowing Mexico and Canada to avoid the 25% tariff on the majority of imports for another 30 days. The pause is intended to expire on April 2.
• On March 5, President Trump announced a one-month exemption from the newly imposed 25% tariffs on automobiles imported from Canada and Mexico.
• On March 4, Another 10% tariff on imports from China and the previously paused 25% tariff on imports from Canada and Mexico went into effect. China & Canada responded with retaliatory tariffs.
• President Donald Trump announced a plan to impose "reciprocal tariffs" on U.S. trading partners. This initiative aims to match the tariff rates that other countries charge on U.S. imports, with the goal of eliminating trade imbalances and ensuring fairness in international trade. The new tariffs are expected to be tailored to each country and are part of a broader effort to strengthen U.S. trade positions.
• Trump stated that the United States will impose 25% tariffs on all steel and aluminum imports.
• President Trump reached a deal to pause on tariffs for Mexico & Canada, while the 10% tariff on China took effect on Tuesday, February 4.
• President Donald Trump is poised to impose tariffs on imports from three major U.S. trade partners. According to a White House confirmation, the tariffs will take effect on February 1, with a 25% charge on products from Canada and Mexico and a 10% rate on those from China.
• President Trump has mentioned replacing the federal income tax with tariffs. He also has mentioned a universal tariff on foreign imports.

Payroll Taxes

While President Trump has made statements about cutting or eliminating payroll taxes—including suggesting relief for seniors—he has not formally detailed how such a move would work without compromising Social Security or Medicare funding. Any major change to payroll taxes would require congressional approval.

Tracking

• Trump has continuously mentioned eliminating taxes on Social Security for seniors.

Estate Taxes

A major concern for high-net-worth individuals and real estate investors, the estate tax exemption was significantly increased under the TCJA and could shrink if the law expires.

Tracking

• According to the 1st tax bill draft, the Estate & Gift Tax exemption will increase and be made permanent.
• The Estate Tax Exemption roughly doubled under TCJA (currently around $13.61 million).

Tax Credits

Several credits introduced or expanded by the TCJA provide significant tax savings, especially for families and certain business activities.

Tracking

• According to the first draft of the tax bill, the Child Tax Credit will be bumped to $2,500.
• The Child Tax Credit doubled under TCJA from $1,000 to $2,000. It would revert to $1,000 per child if TCJA expires. VP JD Vance previously recommended a $5,000 Child Tax Credit.
• Historically, the Trump administration proposed phasing out or ending the EV tax credit.

Other Legislation

While tax reforms take center stage in 2025, several other legislative changes could impact real estate investors and business owners. Here’s what you need to know.

Coming Soon