If you invest in rental or commercial property, the new 2025 tax law might be one of the most exciting developments you've seen in years.
The updates in the “One Big Beautiful Bill” include some big wins—and a few watch-outs—for real estate investors. If you're actively buying, renovating, or managing real estate assets, here’s what you need to know.
1. 100% Bonus Depreciation Is Back—And Permanent
This is the headline-grabber.
As of January 19, 2025, qualifying assets placed in service can now be fully expensed in year one. That means instead of depreciating improvements or purchases over 39 years, real estate investors can now take the entire deduction up front for certain items.
This change is now permanent, offering major upfront savings and powerful cash flow strategies—especially for those investing in:
- Renovations
- Equipment
- Furnishings
- Land improvements
Used correctly, this can dramatically reduce your tax bill in the year of acquisition or upgrade.
2. Basis Shifting Crackdown Called Off (For Now)
The IRS had previously announced plans to tighten enforcement on basis shifting between partnerships—a move that worried many in the real estate space.
Under the new law, that crackdown has been reversed.
The controversial reporting rules are no longer going into effect, giving real estate investors more flexibility in how they structure and shift basis between deals.
That said, basis shifting is still a complex strategy and must be executed carefully to stay within ethical and legal bounds. These techniques require expert-level planning—and precision documentation.
3. More “Soft Letters” from the IRS on the Rise
While some rules have eased, the IRS is still keeping a close eye on real estate partnerships.
Expect to see an increase in “soft letters”—IRS notices that request clarification or explanation about balance sheet activity, partnership returns, or unusual deductions. While not audits, they should never be ignored.
If you receive one, it’s essential to respond properly and proactively. Mishandling a soft letter can escalate into a much larger issue.
What This Means for Your Strategy
These changes offer powerful new tools—but also signal that real estate tax planning is becoming more nuanced. The rules may be looser in some ways and tighter in others, and it’s more important than ever to be strategic, accurate, and ahead of the IRS curve.
If you’re investing in property, considering a renovation, or simply want to ensure you’re taking full advantage of the new law without triggering compliance issues, I’d be glad to help.
Book a call or email me directly at kim@kimberlybagleycpa.com to develop a real estate tax strategy that helps you maximize savings while staying audit-ready.