The 2025 tax legislation, signed into law on July 4, 2025, introduces sweeping changes that will significantly impact taxpayers in the real estate sector. From updated depreciation rules to enhanced deductions and modifications to investment incentives, this legislation presents both opportunities and new compliance considerations. Below, we highlight key tax changes affecting the real estate industry, compare them to current law, and provide planning tips to help real estate professionals and investors adapt strategically.
Key Points
- 100% bonus depreciation is now permanent for qualifying property.
- Section 179 expensing limits have increased.
- Qualified Business Income (QBI) 20% deduction is permanent, with improved thresholds.
- Energy-efficient building incentives have been phased out.
- Opportunity Zones are extended with new criteria.
1. Bonus Depreciation – Full Expensing Permanently Reinstated
What Changed:
Previously set to phase out after 2026, bonus depreciation is now permanently set at 100% for qualifying property placed in service after January 19, 2025. Warning: if you had a contract in place to purchase a property or build a property prior to January 19, 2025, you will need to consult with your tax advisor.
Planning Tip:
Accelerate acquisition and improvement projects to maximize immediate tax write-offs. This change is especially valuable for real estate developers and large-scale investors.
2. Section 179 Expensing Enhanced
What Changed:
The annual expensing limit increased from $1,160,000 to $2,500,000, with a phase-out threshold raised to $4,000,000.
Planning Tip:
Use Section 179 to expense more short-lived property improvements, as well as roofs, HVAC, and security systems, especially in tenant improvements or value-add scenarios.
Normally, rental real estate doesn’t qualify for Section 179 because the activity is generally not considered a trade or business. Please consult with your tax advisor for exceptions to this rule.
3. Qualified Business Income (QBI) Deduction Made Permanent
What Changed:
The 20% QBI deduction is now permanent and includes higher income phase-out thresholds.
Planning Tip:
For those operating through passthrough entities, consider how your structure might optimize the QBI benefit. For those with many activities, consider aggregating activities to maximize your QBI benefit.
4. Elimination of Energy Efficiency Credits
What Changed:
Credits for energy-efficient homes (45L), commercial buildings (179D), and commercial clean energy (48E) are set to sunset after 2026 or 2027.
Planning Tip:
Push to finalize qualifying energy-efficient developments before the cutoff dates and recalculate ROI for future projects with the assumption that these tax incentives will no longer apply.
5. Opportunity Zones – New Round, New Rules
What Changed:
Existing designations end in 2026, with a new Opportunity Zone program launching for 2027–2033. It includes stricter eligibility and reporting, plus new standards for basis step-up and substantial improvements.
Planning Tip:
Reevaluate your investment pipeline. Zones that previously qualified may no longer qualify, so stay updated and consult professionals to reassess project viability under the new framework.
The 2025 tax legislation brings a mix of permanence, phaseouts, and adjustments that real estate professionals must navigate. While provisions like 100% bonus depreciation and increased Section 179 expensing are highly favorable, the loss of energy credits and evolving Opportunity Zone rules require close attention.
Contact Us
For tailored strategies on how these changes impact your real estate operations, visit our Contact Us page. Our industry leaders are ready to guide you through proactive planning under the new law.
About the Authors
Randall Weaver, CPA
Randall joined Trout CPA in 2011. He graduated from Millersville University with a Bachelor of Science degree in Business Administration (magna cum laude) in 2006. Randall has over 19 years of accounting experience. He currently serves on the firm's Construction and Real Estate, Manufacturing, and Estate & Trust Practice Groups. As a Partner, Randall manages all aspects of tax planning and preparation and business consulting for some of the firm's significant clients. Randall enjoys activities with his family, being involved with his church, and rooting for Philadelphia sports teams. He lives in Lancaster County with his wife and two children.
