The Big, Beautiful Bill:
A Game-Changer for Real Estate Investors
In a time when housing affordability, urban revitalization, and economic growth are key national priorities, the "Big, Beautiful Bill" has emerged as a powerful legislative catalyst for real estate investors. Designed to stimulate investment in underserved and transitional neighborhoods, this bill offers a suite of tax incentives, financing assistance, and zoning flexibility that reduces barriers to entry and boosts long-term ROI.
One of the most attractive components of the bill is the significant tax deductions and capital gains deferrals it provides for investments in designated opportunity zones and workforce housing developments. Here is a breakdown of some of the key provisions:
Bonus Depreciation
The bill permanently extends 100% bonus depreciation, allowing businesses to immediately deduct the cost of qualified assets, including certain real property improvements. Qualified property includes most tangible property with a useful life of 20 years or less
Section 179 Deduction
The bill increases the maximum amount that can be expensed under Section 179 to $2.5 million, with adjustments for inflation.
Qualified Business Income Deduction Made Permanent
The Act permanently extends the 20% deduction under Section 199A for certain individuals, trusts, and estates with respect to: (i) "qualified business income" from partnerships, S corporations, and sole proprietorships; and (ii) qualified real estate investment trust ("REIT") dividends (i.e., dividends that are not designated as capital gain dividends and not qualified dividend income) and qualified publicly traded partnership income. Previously scheduled to expire after 2025, the deduction rate remains at 20%.
Qualified Business Income Deduction Made Permanent
The Act permanently extends the 20% deduction under Section 199A for certain individuals, trusts, and estates with respect to: (i) "qualified business income" from partnerships, S corporations, and sole proprietorships; and (ii) qualified real estate investment trust ("REIT") dividends (i.e., dividends that are not designated as capital gain dividends and not qualified dividend income) and qualified publicly traded partnership income. Previously scheduled to expire after 2025, the deduction rate remains at 20%.
Low Income Housing Tax Credit
The bill expands the LIHTC, including a 12.5% increase in 9% LIHTC allocations, a reduction in the 50% financed-by test for properties financed by private activity bonds, and potential basis boosts for properties in rural areas and tribal communities.
In essence, the One Big Beautiful Bill provides tax incentives and regulatory changes that are largely favorable for the real estate sector, potentially driving investment and development across various property types. Make sure to capitalize on this amazing opportunity as a real estate investor!