2025 brings significant changes to tax laws affecting real estate investors. From bonus depreciation phase-outs to potential TCJA sunset provisions, understanding these changes is crucial for effective tax planning. Here's what every investor needs to know.

⚠️ Key Changes for 2025

  • Bonus Depreciation: Reduced to 40% (down from 60% in 2024)
  • Section 199A: QBI deduction remains at 20% through 2025
  • TCJA Sunset: Many provisions expire after 2025
  • Estate Tax: Exemption remains high through 2025

Bonus Depreciation Phase-Out Continues

The most immediate impact for real estate investors is the continued phase-out of bonus depreciation:

Bonus Depreciation Schedule

  • 2023: 80%
  • 2024: 60%
  • 2025: 40% ← Current year
  • 2026: 20%
  • 2027: 0%

Strategic Implications

  • Complete cost segregation studies before further reductions
  • Accelerate equipment purchases while benefits remain
  • Consider timing of major property improvements
  • Evaluate 1031 exchanges for properties with substantial personal property components

TCJA Sunset Provisions

Many Tax Cuts and Jobs Act provisions expire after 2025, creating planning opportunities and challenges:

Expiring Provisions (2026)

Section 199A QBI Deduction

The 20% qualified business income deduction for pass-through entities expires

Standard Deduction

Returns to pre-2018 levels (adjusted for inflation)

Tax Brackets

Revert to higher pre-TCJA rates

Estate Tax Exemption

Reduces from $13.99M to approximately $7M per person

Planning Strategies for 2025

🏃‍♂️ Accelerate Before Year-End

  • Complete cost segregation studies while 40% bonus depreciation available
  • Purchase and place personal property in service
  • Execute major property improvements with depreciable components
  • Consider entity restructuring before potential rate changes

⏰ Defer Where Beneficial

  • Delay property sales if expecting lower future rates
  • Consider installment sales to spread income
  • Plan 1031 exchanges for optimal timing
  • Evaluate Opportunity Zone investments

What to Watch in 2026

The tax landscape could change significantly in 2026 depending on legislative action:

Scenario 1: TCJA Extended

Congress extends current provisions, maintaining status quo for real estate investors

Scenario 2: Partial Extension

Some provisions extended, others allowed to expire, creating mixed impact

Scenario 3: Full Sunset

All provisions expire as scheduled, reverting to pre-2018 tax law

Action Items for 2025

🔴 High Priority (Complete by Q2)

  • Review portfolio for cost segregation opportunities
  • Plan major equipment purchases and improvements
  • Evaluate current entity structures
  • Model scenarios for 2026 tax changes

🟡 Medium Priority (Complete by Q3)

  • Consider 1031 exchange opportunities
  • Review estate planning strategies
  • Evaluate income timing strategies
  • Plan for potential QBI deduction loss

Model Your Tax Impact

Use our capital gains calculator to model how these 2025 changes affect your specific investment scenarios.

Calculate Your Tax Impact