The “One Big, Beautiful Bill”: What Real Estate Investors Need to Know

A draft of the long-awaited 2025 tax bill, coined the “One Big, Beautiful Bill”, is finally here. While it’s still subject to change, this version includes sweeping updates that real estate investors, business owners, and high-income earners should start planning for now.

In this week’s episode of the Tax Smart REI Podcast, Thomas Castelli sat down with Nathan Sosa, Head of the National Tax Department at Hall CPA, to unpack everything investors need to know.

Where the Bill Stands Now

The bill has passed the Ways and Means Committee and is headed to the Budget Committee. The goal is to pass it in the House before Memorial Day, but negotiations (especially around the SALT cap) could slow things down.

SALT Cap Showdown

The proposal raises the state and local tax (SALT) deduction cap from $10,000 to $30,000, but begins phasing it out at $400,000 of AGI. Lawmakers from high-tax states are pushing for a higher cap, and this disagreement could become a major sticking point.

100% Bonus Depreciation Is (Mostly) Back

Great news for real estate investors: 100% bonus depreciation returns for four years (2025–2028). But there’s a catch: it only applies to assets acquired and placed in service after January 19, 2025.

Earlier acquisitions will still fall under the existing phaseout schedule.

Section 179 Expansion

The bill doubles Section 179 expensing limits:

• Deduction cap: $2 million (up from $1M)
• Phase-out threshold: $4 million (up from $2.5M)

This is a big win for short-term rental owners, gas stations, and other capital-intensive operators.

Qualified Opportunity Zones Get a Facelift

While the 2026 capital gains recognition date remains, the bill introduces:

• New zones and new investment opportunities
• A 10% basis step-up after five years (30% for rural areas)
• A new $10,000 ordinary income deferral

Senate revisions are likely, but the 10-year hold benefit still stands.

QBI Deduction Jumps to 23%

The Qualified Business Income (QBI) deduction increases from 20% to 23%, and the phaseout for service-based businesses (like accountants, attorneys, and consultants) is simplified. If your income is under $555K, you’ll likely see bigger benefits.

Full Expensing for Industrial Facilities

Factories and industrial properties can now fully expense their entire cost, including the 39-year portion, in year one. Hold the property for 10+ years, and depreciation recapture disappears. This could supercharge industrial development in the U.S.

“No Tax On…” Provisions

A few campaign trail promises made it into the draft:

• No tax on tips (deduction offsets reported tips)
• No tax on overtime (only for earners under $160K)
• Social Security boost (additional $4,000 standard deduction—not a full exclusion)

All are temporary: 2025–2028 only.

Making the Trump Tax Cuts Permanent

Several TCJA provisions were set to expire in 2025—but not anymore:

• 37% top tax bracket becomes permanent
• The standard deduction remains doubled
• Child tax credit stays at $2,000, with an extra $500 per child for 2025–2028

Excess Business Losses (EBLs) Tightened

EBL caps of $620K (MFJ) are now permanent, and the previous NOL workaround is gone. Losses above the threshold are carried forward, but subject to the cap each year. This mostly impacts high-income professionals using STRs or REPS.

Auto Loan Interest Becomes Deductible

Up to $10,000 in auto loan interest will now be deductible, if the vehicle is manufactured in the U.S. It’s an above-the-line deduction, not limited to itemizers.

Interest Expense Cap Relief for Large Investors

Real estate syndicates and funds with >$25M in gross receipts will benefit from relaxed limits on interest expense deductions. Depreciation add-backs are no longer required in the calculation.

Carried Interest Survives

Despite speculation, carried interest didn’t make it into the bill. The three-year hold rule for real estate promote remains unchanged, for now.

Key Wins for Real Estate Investors

✅ 100% bonus depreciation (2025–2028)
✅ Section 179 expensing expanded
✅ Industrial properties = fully deductible
✅ QoZs still offer 10-year gain exclusion
✅ QBI deduction bumped to 23%
✅ Strategic wins for syndicators and fund managers

What You Should Do Now

If this bill passes, the demand for real estate-savvy CPAs will explode.

Now is the time to align with a team that:

• Understands REPS and STR loopholes
• Has defended 20+ IRS audits
• Knows how to leverage bonus depreciation and cost segregation

Book a free 30-minute discovery call with our team today to see how we can help you save five to six figures in taxes, compliantly.

Transcript

Introduction

Thomas Castelli [00:00]: Thanks for tuning into this episode of the Tax Smart REI podcast. Today’s a special episode on the One Big, Beautiful Bill. We’re joined by Nathan Sosa, Head of our National Tax Department, who’s been tracking this closely. This draft bill includes 100% bonus depreciation, SALT cap increases, changes to Qualified Opportunity Zones, QBI deduction updates, and more. We’ll be diving into all of that in just a moment.

Where the Bill Stands

Nathan Sosa [00:52]: Thanks for having me on, Tom. Right now, the bill has passed the Ways and Means Committee. From here, it moves to the Budget Committee, which will vote on it, likely today or tomorrow. Then it moves to the House for a full vote—hopefully before Memorial Day. That’s the target timeline, but of course, things can change.

Thomas Castelli: Just for reference, it’s May 15th today for everyone tuning in.
Nathan Sosa: Right, and assuming it passes the House, the next step would be the Senate. But again, this is just a draft. Nothing is final yet.

The SALT Cap Drama

Thomas Castelli [02:11]: Let’s dive into the SALT cap first. What is it and why does it matter?

Nathan Sosa: The SALT cap came from the 2017 Tax Cuts and Jobs Act, which limited state and local tax deductions to $10,000. This hit high-tax states hard. The proposed bill raises the cap to $30,000, but phases it out beginning at $400,000 of AGI. So if you earn more than that, the benefit is reduced.

Thomas Castelli: I saw some high-tax state lawmakers already calling this portion “dead on arrival.”

Nathan Sosa: Right. There’s significant disagreement. Some House members from blue states are pushing for a $62,000 cap, which House leadership is rejecting. They’re nowhere close to agreement. It’s the most contentious part of the bill and could derail the whole thing if not resolved.

Thomas Castelli: So to summarize: it raises the cap from $10K to $30K, but only for those making under $400K—and it’s subject to ongoing negotiation.

Bonus Depreciation Is (Mostly) Back

Thomas Castelli [05:33]: Let’s move on to bonus depreciation—a big one for our listeners. What’s going on there?

Nathan Sosa: Bonus depreciation is back at 100% for four years: 2025 through 2028. But here’s the catch: it only applies to property acquired and placed in service after January 19, 2025. So if you bought something in 2024 and placed it in service in 2025, you’re stuck with 40% bonus, not 100%.

Thomas Castelli: That’s disappointing for people who purchased before the cutoff, but great for acquisitions moving forward. How likely is this provision to make it into the final bill?
Nathan Sosa: I’d say 99% likely. It’s bipartisan, widely supported, and gives lawmakers something to campaign on. There’s even a chance the Senate pushes for permanent full expensing, but that’s still uncertain.

Section 179 Expansion

Nathan Sosa [08:12]: Section 179 also gets a boost. The deduction limit increases from $1 million to $2 million, and the phase-out threshold rises from $2.5 million to $4 million. This helps short-term rentals, hotels, and other asset-heavy businesses make larger deductions.

Qualified Opportunity Zones (QoZ)

Nathan Sosa [09:45]: There are changes to Qualified Opportunity Zones too, though I don’t think they’ll be final. The capital gains recognition deadline stays at 2026 for now. A new wave of zones is being created, and new rules offer a 10% basis step-up after five years, or 30% for rural investments. There’s also a $10,000 deferral allowed on ordinary income, including depreciation recapture. But again, I expect the Senate to make changes.

Thomas Castelli: So investors in QoZs still get the 10-year hold benefit, but not the broader extensions they were hoping for.

Nathan Sosa: Correct. The core benefits remain, but the big enhancements aren’t there—yet.

QBI Deduction Boost

Thomas Castelli [12:44]: What’s happening with QBI, the Qualified Business Income deduction?

Nathan Sosa: It’s going up from 20% to 23%. Initially, the draft had 22%, but now it’s 23%. More importantly, they simplified the phaseout for Specified Service Trades or Businesses (SSTBs) like accountants, lawyers, and doctors. Previously, the phaseout was overly complex. Now it’s simpler—still math-heavy, but more predictable. For example, the sweet spot is around $555,000 of taxable income to get the full benefit.

Thomas Castelli: So more service providers can tap into this benefit, especially those previously phased out.

Full Expensing for Factories & Industrial Facilities

Nathan Sosa [16:18]: This bill includes full expensing for industrial facilities—factories and manufacturing plants. Previously, the 39-year portion of those buildings had to be depreciated over time. Now, they can be fully expensed in year one, which is a massive change. And if you hold the property for 10 years, you escape depreciation recapture entirely.

Thomas Castelli: That’s huge. Expect a boom in industrial and manufacturing investments because of this.

No Tax on Tips, Social Security & Overtime

Nathan Sosa [19:32]: Let’s talk about the “no tax on” provisions.

• Social Security: No exclusion, but there’s a $4,000 standard deduction boost for Social Security recipients.
• Tips: A deduction offsets reported tip income from 2025 to 2028.
• Overtime: The time-and-a-half portion of overtime pay is tax-free—but only for those earning under $160K annually.

Thomas Castelli: Definitely helpful for W-2 workers and service industry professionals.

Making 2017 Tax Cuts Permanent

Nathan Sosa [24:57]: Some provisions that were set to expire in 2025 are now made permanent:

• The 37% top income tax rate stays
• The standard deduction remains doubled
• Child tax credit stays at $2,000, with an additional $500 per child from 2025–2028

Thomas Castelli: So, if you’re planning to have kids, now’s the time!

Nathan Sosa: Exactly—triplets might be a better tax move than buying a Tesla now that EV credits are getting rolled back.

Excess Business Loss (EBL) Rule Tightened

Nathan Sosa [29:23]: The EBL cap of $620,000 (MFJ) is made permanent. Previously, you could carry over losses into future years as unrestricted NOLs. That loophole is now closed. Each year, the cap applies independently. This mostly impacts high-income earners using short-term rental strategies or real estate professional status.

Thomas Castelli: That’s a loss, but $600K of deductions still goes a long way.

Auto Loan Interest Deduction

Nathan Sosa [33:39]: Up to $10,000 of interest on car loans can now be deducted above the line—if the vehicle is manufactured in the U.S.

Interest Expense Limit Eased for Large Investors

Nathan Sosa [34:28]: For businesses with $25M+ in gross receipts, the interest deduction limitation calculation no longer requires you to add back depreciation. This helps real estate syndicates with lots of passive investors take full deductions again.

Carried Interest Lives On

Nathan Sosa [36:29]: Despite rumors, carried interest was not touched in the draft. I don’t expect the Senate to add it either. Real estate funds, particularly those structured to benefit from the three-year hold period, are safe.

Closing Thoughts + Call to Action

Thomas Castelli [37:44]: A quick summary:

100% bonus depreciation is almost certainly coming back. QoZs are getting updates. Section 179 is expanding. Industrial expensing is game-changing. A slew of provisions help W-2 workers and retirees. But the time to prepare is now. CPA firms that understand REPS, STRs, and these new changes will become overwhelmed.

If you’re not already working with a qualified real estate CPA, start that conversation today. You can book a free 30-minute discovery call with our team using the link in the show notes. We’ve successfully defended over 20 audits, many involving REPS and STR strategies. Don’t wait until it’s too late. Get ahead of the curve now.

Disclaimer: This podcast summary and transcript were partly generated and may contain some errors or miss key points from the audio recording.