The “Big, Beautiful” Tax Breaks You’ll Get in 2025

Dave:
President Trump signed the one big beautiful bill act into law on July 4th. And there are some huge potential implications for real estate investors. Tax code changes can be complicated, and there were numerous different versions of this bill that floated around before the final bill that passed in the house and Senate was actually finalized. So today we’re gonna break down what’s actually in the bill and how it can save you money on your 2025 returns. Hey everyone, it’s Dave. Welcome back to another episode of On The Market. We’re talking about President Trump’s big, beautiful bill. Today we’re going to get into bonus depreciation. Salt caps pass through deductions and much more. These tax code nuances might not be the most exciting thing out there, but understanding them can absolutely increase your returns and really help your financial position. However, I am absolutely not a tax expert. So joining us today is Brandon Hall to help us unpack this whole thing. Brandon is a CPA and a real estate investor himself and his practice is devoted exclusively to helping real estate investors optimize their tax strategies. There’s a lot to dig into in the big beautiful Bill. So let’s bring on Brandon. Brandon, welcome back to On the Market. Thanks for joining us here today.

Brandon:
Thanks Dave, for having me. I’m excited to be here.

Dave:
We are excited to have you on here to help us understand the tax implications for both Americans and specifically for real estate investors. Let’s start big picture. Can you tell us at the highest level what’s in this bill? Uh, from a tax perspective,

Brandon:
I mean, the main thing is that a lot of the 2017 tax cuts in Jobs Act, the Trump tax cuts are now made permanent. So like things like a hundred percent bonus depreciation, for example, is now permanent. Uh, so I would say that’s like the main crux of this bill.

Dave:
Yeah.

Brandon:
There’s also a lot of other provisions in there as well. This bill also fixes some things that were like phasing out, so like r and d tax credits. Um, you can now retroactively apply those.

Dave:
Okay.

Brandon:
Uh, so stuff like that. But that’s the main takeaway is that’s primarily making the 2017 TCJA tax cuts permanent and then adding a few things here and there as well.

Dave:
What was in the 2017 tax bill? Like what are we extending and can maybe tell us? ’cause I think it’s pretty important to know like what would’ve happened if they didn’t get extended as well.

Brandon:
Yeah, well if, if they wouldn’t have gotten extended, a lot of these things were gonna go away. So things like the estate, uh, tax exemption, uh, a hundred percent bonus depreciation was already phasing down. So already in 2025 we were at 40% and there was really no, like, it was gonna go to 20% next year, 0% in 2027. And there wasn’t anything to like bring it back. Right. So it was just gonna be gone.

Dave:
Yeah.

Brandon:
The QBI deduction, the 20% deduction on business income that was phasing out. There’s a ton of stuff, but I mean the, the main thing for real estate investors is the a hundred percent bonus. Sometimes also the QBI deduction as well, the salt changes like that, that was $10,000 and that would actually have been probably a positive, a positive kickback at the end. But the, the end of this cliff, a lot of the provisions were expiring at the end of this year. So it was like a lot of tax planning was starting to happen, but now all of those provisions have been pushed back.

Dave:
Okay. So let’s break those things down first, basically, is any of the TA are tax brackets changing? Because I think that that was one of the main things right? In 2017, like a lot of them got lowered mm-hmm . Um, but that’s cha that’s basically staying where it was from 2017

Brandon:
Yes. Staying where it was, um, locked in. So no, in theory, no future changes.

Dave:
Okay.

Brandon:
All of this, by the way, is permanent until the next big tax legislation comes out. So we don’t, like, when I say permanent, take that with a grain of salt. It’s supposed to be permanent, but you can always change the law. So, but yeah, the, the, the tax brackets, they’re all still gonna be the same as they have been in recent years.

Dave:
For the average American, then, are they going to feel the impact of this? Because I think a lot of the proponents of this bill are saying that this is gonna stimulate the economy. Right? And so I’m just curious, like, is this going to put more cash in the average American’s pocket?

Brandon:
I would say this can help. I don’t think it’s necessarily gonna hurt. I think it is going to help, but I will say that it’s definitely gonna help people that are running businesses or investing in real estate es essentially wealthier people. Mm-hmm . More so than the average Americans. I will say that, that’s my belief. Now, again, I, my belief might change once I see some of the scoring come out.

Dave:
Okay.

Brandon:
Cool. So specific things that are gonna help the average American. This bill was, uh, in my, uh, professional career uniquely focused on families. So they expanded a lot of family credits such as,

Dave:
Yeah,

Brandon:
The employer provided childcare credit. Uh, the credit rate increased, the refundable adoption credit, the amount that you can get refunded increased the enhanced dependent care credit. The exclusion amount is increased. The enhanced child independent care tax credit prior to TCJA, I think it was a thousand dollars. Now it’s $2,000 per child and that’s gonna be retained. Right. So it’s a, a lot of things that are focused on giving back to people that have families. Mm-hmm . There’s the new MAGA account, which is, you know, depending on your political ideology, uh, yeah, may be good, may not be good. But, um, the new MAGA accounts are, uh, it’s a, it’s a tax credit that you receive much like a, um, a Roth IRA. So you would kind of report on your taxes that I opened up an account for my child, I added a thousand dollars to it, and now I get a thousand dollars credit from the government on my taxes as a result of making that investment for my child. So those are gonna be in, in play, I think starting in 2026. So a lot of like family focused things that I do think will help anybody that has families.

Dave:
Maybe you could just explain this is like tax 1 0 1, but explain the difference between a tax and a tax deduction because tax credit’s better, right? That’s, that’s what you want.

Brandon:
Oh, yeah. Yeah. Tax credit’s definitely better. So a thousand dollars tax deduction is a deduction from my income and tax is then calculated on my income. So if my income is 10,000 and I get a $1,000 deduction, then my taxable income is $9,000. Taxes figured on that. So let’s say it’s 20%, my tax is $1,800. Okay. Now without the deduction, $10,000 of taxable income times 20% of tax would be $2,000. So

Dave:
Yeah,

Brandon:
A $1,000 tax deduction puts 200 bucks back into my pocket. All right. So that’s the benefit of it. Now, a tax credit is you had $10,000 of income, $2,000 in taxes, but now you get a $1,000 tax credit, meaning that your tax is only $1,000. So my tax was 2K, but I get a $1,000 credit, so now I only have to pay a thousand bucks. So a credit is a one for one, uh, dollar for dollar a deduction is whatever the deduction amount is multiplied by your marginal tax bracket.

Dave:
Well, it just sort of underscores for everyone listening to like, do the math on these things and not just like, assuming you’re like, oh, I get a tax credit. Like figure out what it actually means. ’cause as just as a comp, right? We have the, you have the mortgage interest tax deduction, which really does add up to a lot of money. Oh yeah. At least when I’ve run it for my own personal residence. Like that saves you quite a lot of money, especially upfront in your mortgage when you’re paying predominantly interest. That could be a really good thing. So just do the math.

Brandon:
We, we are in an age where AI creates content and people just post the content. Okay. Up to the highest office . So

Dave:
Yes,

Brandon:
It doesn’t really matter who’s saying what at this point. You really have to understand that AI is, is such a big part of everybody’s content creation process now that you really should be asking, how do I know this is true?

Dave:
Yeah.

Brandon:
You just, you just have to be careful. It’s, it’s actually crazy

Dave:
. Yeah, no, it’s not. It, it is really a little scary. So you need to be careful and obviously we’ll get better, but double check it. Yeah, double check. I, I totally

Brandon:
Agree. Yes.

Dave:
But let’s talk about QBI. ’cause I think that’s one of the coolest things available for real estate investors that I don’t hear people talk about it very much. Can you, can you tell us a little bit about it?

Brandon:
Yeah, so, so the QBI I deduction is the qualified business income deduction. And basically for every dollar of business income that you generate, you get a 20% deduction on every dollar. You don’t have to jump through any hoops. If you generate like a hundred thousand dollars of business income and you get a, you get the QBI deduction of $20,000, then you get to pay taxes on $80,000 of business income. Now, there are rules as it pertains to real estate. So the real estate has to be a real trader business. And there’s a whole set of subset, there’s a whole subset of rules that go through what exactly this is. There’s, there’s participation standards as part of those rules. You cannot be a, uh, an SSTB, which is specialized service trader. So an accounting firm for example, can’t qualify for something like this. There are also phase out limits in terms of income. So real estate investors that have been doing this for a while sometimes find that they can’t actually qualify for the QBI deduction because they make too much money. And that’s a reality for a lot of, a lot of real estate investors too. So if you’re just hearing about this and you’re like, why has my accountant ever told me? It’s probably just because you’ve been phased out. Um, and there’s not much that you can necessarily do to fix that potentially.

Dave:
Yeah. That’s disappointing though. ’cause my understanding was the whole idea behind this was to sort of equalize the cuts that were given to large corporations, like C corp were getting this big tax cut in 2017. It was like, oh, the small businesses sort of like this was the way to equalize that. Right. Wasn’t that at least the logic behind

Brandon:
It? Yeah. Yeah. And, and I, I would say that actually worked out pretty well. So the whole idea was the QBI deduction being 20%. We’ve got the, the lower corporate tax rate that’s gonna prevent business owners from just flipping their businesses over to corporate taxes. Right? So, so making themselves a C corporation to benefit from that lower, lower tax rate, I would say it largely accomplished that purpose. So business owners have been getting, have been claiming this QBI deduction, it passes through it, it works really well. And real estate investors, I guess can, can still claim it, but most real estate investors, uh, I’ll, I’ll amend my prior statement in that there is an income phase out. However, the main reason that real estate investors don’t really benefit from this is because most real estate investors are using bonus depreciation to create large tax losses. Thus there is no business income,

Dave:
Right. For

Brandon:
QBI purposes coming from their real estate. Uh, but if you can create income from your real estate, then you can absolutely check out QBI and potentially use some of that as well.

Dave:
Yeah. ’cause I was thinking about like a flipper, right? Would would it qualify for this? Like if you had a flipping business Yeah. Um, and you’re not, ’cause then you’re probably not getting bonus depreciation, right? So you’re, you’re flipping it and it’s normally would be treated as ordinary income or passed through an LLC, but you might be able to use this for that kind of thing.

Brandon:
Yeah, yeah, yeah. Most businesses qualify, uh, except for those specialized service trader businesses. Real estate agents, I believe at one point were categorized as SST bs. But they’ve got a great lobby and they were even eventually, uh, stripped out of that, I believe. But business, yeah, absolutely. Flippers, definitely.

Dave:
All right, well let’s turn to the big topic, which of course is bonus depreciation, but we do need to take one quick break. We’ll be right back. Welcome back to On the Market. I’m here with accountant, CPA tax expert for real estate investors. Brandon Hall, we were talking about the new one. Big beautiful bill act that just got signed by President Trump into law over the past weekend. We’ve talked a little bit about high level what the tax bill has, what it doesn’t for real estate investors. I think the main thing most people are looking for is bonus depreciation. Brandon, maybe just give us a little background if people haven’t listened to previous episodes you’ve been on. What is bonus depreciation?

Brandon:
Bonus appreciation, uh, has, has existed for a long time in 2017, the 2017 TCJA increased bonus depreciation from 50% to 100%. And then there was a phase down that was starting, uh, in 2023. So in 2023, bonus depreciation would drop from a hundred percent to 80%. 2024, it would be 60%, 20, 25. This year it’s 40%, 20% in 26, and then 0% in 2027. So basically from 2017 to 2022, you could buy real estate and benefit from 100% bonus depreciation. Now, the way that this actually works is, first you have to get a cost segregation study performed, because when you buy a property, there are components of the property that don’t last 27 and a half years or 39 years in the event of commercial property. And that’s where, when, how long property’s typically depreciated, right? So I buy a million dollar property, uh, I have to allocate value to land dirt does not fall apart over time.
And that is what ultimately depreciation is meant to track, is the deterioration of your components over time. So I buy a million dollar property, uh, 20% is land, which is 200 K. So I push $200,000 out of this depreciation bucket. I’m left with $800,000. If it’s a residential property, I do 800,000 divided by 27 and a half. That’s my annual depreciation expense. If it’s a commercial property, I do $800,000 divided by 39 years. That’s my annual depreciation expense. What a cost segregation study does is it says, Hey, you bought a million dollar property, you push $200,000 out to land, you, you’re left with 800 K. But the reality is, is that there’s a lot of components inside this building that make up this building that are not going to last 27 and a half or 39 years. So let’s identify those components and let’s depreciate them over a faster time period.
And the result of a cost segregation study is that you get these value allocations to five year, uh, schedules, seven year schedules, 15 year schedules, and then the remainder is still in that 27 and a half or 39 years. And when you do a cost segregation, depending on the building type, you could generally expect to see 20 to 30% of the, of the value be allocated to five, seven, and 15 year property. So it’s highly advantageous, right? Like, like if I were to allocate, just to make it simple, um, well, I’m gonna make it simple. I’m gonna have to pull the calculate

Dave:
Not simple enough to do it in your head.

Brandon:
, if, if we were to allocate, um, let’s actually try to keep it simple. So let’s say of the 800 k, $270,000 gets allocated to five year property.

Dave:
Okay.

Brandon:
Alright. So $270,000 over five years is $54,000 a year.

Dave:
Okay.

Brandon:
All right. And that’s, and I, if you’ve got any accountants listening to this, I know that there’s accelerated depreciation, but I’m just trying to keep it simple.

Dave:
Yeah, just an example. Lay off them.

Brandon:
270 k allocated the five year schedule. Now you have $270,000 being depreciated $54,000 a year for five years. Now if you didn’t do this reallocation, the $270,000 is depreciated over 27 and a half years. So you get a $10,000 a year. So you get $10,000 a year for 27 and a half years, or you can get 54 KA year for five years. Now do net present value calculation, time value of money, most of the time you’re going to want to get the 50 4K for five years. Yeah. So that’s why cost segregation studies exist. We are accelerating the recognition of depreciation and because we get a larger deduction, 50 4K versus 10 for five years, we get larger tax savings that we can then go reinvest and increase the snowball of the wealth building.

Dave:
Yep.

Brandon:
Or the wealth building snowball, right?

Dave:
Yes.

Brandon:
So a hundred percent bonus depreciation, that’s where this comes in, applies to all components with a useful life of less than 20 years. Now I just said on an 800 K building, you’d expect 20 to 30% of the value to be allocated to five, seven, and 15 year property, which is all less than 20 years. Thus it all qualifies for bonus depreciation. So where I, where we just kinda went through this example of 270 k for this, 50 4K per year for five years. Now it’s 270 K in year one.

Dave:
Yep.

Brandon:
Okay. And that’s the power bonus depreciation. So now I don’t have to, I don’t have to take it over five years. I get it all today.

Dave:
That’s incredible.

Brandon:
Yeah. Whatever allocation I can make to 5 7, 7 15 year property. So cost segregation studies, the value of them skyrocket.

Dave:
I have a few questions about this. So I think the first thing everyone needs to know is that this basically just got extended right? It was phasing out over time and is in the new bail, Brandon, is it getting phased out again or is it just continuous a hundred percent indefinitely?

Brandon:
A hundred percent indefinitely, no phase outs. It’s there forever until somebody needs a pay for and they need to knock it down.

Dave:
Okay, got

Brandon:
It. And they rewrite the law.

Dave:
And does every kind of real estate investor benefit from this or do you have to be a real estate professional?

Brandon:
Uh, you do not have to be a real estate professional, but if you are a real estate professional, you will receive more benefits in the context of, uh, I get the tax savings today and I get to realize the full extent today.

Dave:
Okay.

Brandon:
But if you’re not a real estate professional, and if you’re not running the short-term rental loophole, which is all over social media now a hundred percent bonus depreciation can absolutely help you. You just have to be a little more strategic about it, right? Mm-hmm . So the reason that you have to be a little bit more strategic is because bonus depreciation ultimately creates losses. So what Dave kind of jumped to was real estate professional status to use the losses. If you, if you aren’t a real estate professional and if you can’t otherwise make the losses non-passive, then the losses created from investing in real estate are gonna be considered passive losses. And passive losses can only offset passive income. A lot of real estate investors, especially when they’re starting out, don’t have passive income. My W2 income is not passive ’cause I’m materially participating in that my business income is not passive because I’m materially participating in that.
So we don’t really have passive income sources, interest, capital gains, dividends, all of that is also considered not passive. I know that sounds weird, but that’s how the law is written. The whole purpose of these rules is to prevent rich people from using rental real estate to offset the regular income. So it kind of starts to make sense in that context. So if you use a hundred percent bonus depreciation to create large tax losses, uh, you gotta ask, can I use the tax losses? And if the answer is no, I can’t because they’re passive, you don’t lose them. They get suspended on your tax returns and they can be useful at some later point. Like if I want to go sell a rental, for example, the gain on sale is considered passive income. So, so, so it flows through to this calculation where it would unlock those losses that have been suspended and are passive.

Dave:
Got it.

Brandon:
So I get flexibility in the sales decision. I don’t have to do it 10 31 exchange, I can just sell.

Dave:
Yep.

Brandon:
I did that this year actually personally. So there, you know, you don’t like totally lose the benefits, but it’s definitely not as optimal as being able to claim everything right now for most people.

Dave:
And how much does one of these segregation studies usually cost?

Brandon:
Uh, it depends. They really, it really depends. , lemme run through the different levels. Um, so there are $500 there, DIY software options. You have to plug everything in yourself. I always recommend that you buy the audit insurance. It’s probably an extra 150 bucks. Some of ’em include it, but buy the audit insurance and, uh, that’s an option. The next level of option is to do like a virtual site visit. So you would kind of, you would get on with a professional and the professional would tell you to walk around the property, take pictures of certain manufacturer tags on the, on the different pieces of equipment that you have and map things out and stuff like that. So, so you’re doing the virtual video walkthrough. Somebody on, on the other side of the zoom is recording everything for you, and then they’re gonna go perform the study by hand.
And then you have the higher end studies where they will fly somebody out to your property and walk it. At the end of the day, the answer is, it depends on your risk tolerance. So we have, um, been the, uh, beneficiary, I guess all of our content has kind of come back to us in a very positive way in the sense that real estate investors that didn’t wanna bite on our, like tax planning engagements, um, they go use somebody else and then, but they eventually circle back around to us when they’re getting audited . Yeah. So we could still help them in a, in a roundabout way. Yeah. and, uh, we have, we have successfully defended, uh, the software studies, the virtual studies, and the real studies. I will tell you that the real studies, the big ones where they walk through your property are pretty much just pushed through, uh, at the IRS office, the software studies are always challenged. The virtual studies are challenged a lot as well. Now, it doesn’t say that anyone’s necessarily more or less or better or worse. Well, the big studies are definitely more comprehensive and, and that’s, and they’re more, they’re higher trust and I guess in the auditor’s eyes. And so all that means is that if you go downstream when you get audited, you’ll probably be paying for it at that point in stress and money.

Dave:
And how long do they take if someone wanted to do something like this?

Brandon:
Uh, I mean, you can get really fast turnarounds like the DIY stuff’s, instantaneous full study. I mean, once they do the walkthrough, it’s probably 48 to 72 hours to really get it all into their system and, and push out a report.

Dave:
Okay. So that’s bonus depreciation, or did I miss anything else there, Brandon, that do you think folks should know?

Brandon:
I just wanna reiterate that industrial piece is if you’re the operator of some sort of production based, uh, business and you are using an industrial warehouse or even a portion of that, that portion allocated to your business can be fully expensed under a hundred percent bonus. So there’s no, like, there’s no 39 year component to that anymore, which is, um, wow. Fascinating. Yeah, it’s, it’s very interesting. Very interesting.

Dave:
All right. We do have to take a quick break, but we’ll have more with Brandon and the one big beautiful bill act right after this. Welcome back to On the Market. I’m here with CPA and investor Brandon Hall talking about the tax implications in the one big beautiful Bill act.

Brandon:
So another big one that probably will impact listeners of this show, the SALT deduction was raised from 10 to $40,000.

Dave:
Yeah, that’s a big one. So maybe just explain salt deductions in the first place.

Brandon:
Yeah. So prior to 2017, a lot of taxpayers itemized meaning that they had their income. They were, they put their W2 on their 10 40, then they go fill out Schedule A where they report their mortgage interest, all their property taxes, and then their state and local income taxes. One of the pay force for the 2017 Tax Codes and Jobs Act was to reduce people’s ability to deduct their state and local income taxes. So there was a cap put on state and local income taxes of $10,000. And so, you know, if you’re out in California and you’re making $500,000 a year, you’re probably paying 60, $70,000 in California state taxes that you used to be able to deduct, but now you’re limited to 10 K. Yeah. Like overnight costs a lot of people, a lot of money, um, making that change.

Dave:
Yeah.

Brandon:
But now that cap has been raised to $40,000, and that is gonna be through 2030, which will then drop back to 10 K again. So we’re gonna have this fight again at some later point. The other one too is that, uh, QSBS, if we have anybody in the tech space here, uh, listening to this show, uh, you should go and, and review some of the qsb. I, I don’t, we don’t have to get into it today, but the, the QSBS provisions have gotten pretty sweet.

Dave:
What does that stand for? QSBS

Brandon:
Qualified Small Business stock. Okay. So it’s like if you, if you’re an employee of a, uh, startup and uh, they’re giving you a bunch of stock, it’s really advantageous for people if they meet the hold period requirements because whenever that liquidates, they can wipe out all of their tax on all of their upside. Oh, okay. A lot of their upside. Uh, but those provisions have changed a little bit. So if that’s relevant to you, make sure you touch base with your

Dave:
Advisor. Well, Brandon, thank you so much for being here. This has been super helpful.

Brandon:
No problem, Dave. Thanks for having me. I appreciate it.

Dave:
And just for everyone out there, just as a reminder, check with your accountant, if you have one. Learn everything you can about this. ’cause there definitely are some provisions in there that can be beneficial to you as a real estate, as a real estate agent, a small business owner. These are important things, and I know I am very guilty of overlooking tax strategy early in my investing career, but I think as you progress as an investor, you realize how important and how advantageous this can be to you. So go talk to your tax strategist or your ta, your CPA, or if you’re a DIY, or just do, do yourself a favor and, and go read the bill and, and, uh, check all, like Brandon said, make sure not to just look at an AI study without double checking it, but learn all these advantages. They could save you hundreds, thousands, 10 thousands of dollars in the next year or two if you apply this. Right. So this is a, a no-brainer. It’s the law. You’re allowed to do all of this. You should absolutely go and take advantage of it. All right. Thank you all so much for listening to this episode of On The Market. We’ll see you next time. I.