Real Estate Investing & the “Big Beautiful Bill Act”

[Matthew Schumacher]

Hey fellow investors,

I’ve been following the early chatter around the proposed Big Beautiful Bill Act—and while details are still emerging, it’s clear that this could have a major impact on real estate investing, especially in how we structure deals, manage tax strategies, and approach asset holding in the coming years.

Here are a few questions I’ve been mulling over:

• Depreciation changes? Could this act reshape how we take depreciation or even limit bonus depreciation benefits that many of us rely on?

• LLC and S-Corp structures: Will entity taxation or flow-through treatment come under new scrutiny?

• Cost segregation studies: If incentives tighten, will these become less favorable—or even more critical to do early?

• Capital gains treatment: Is the Act going to redefine short vs. long-term horizons, or increase rates?

If you're holding multiple properties, using leverage, or actively involved in developments or syndications, these shifts could really move the needle.

I am curious how others are planning for this. Are you making moves now in anticipation of possible tax code revisions? Holding off on acquisitions? Re-structuring your entities? Or just waiting for more clarity?

Would love to hear how you're thinking about it—whether you're a seasoned investor, a CPA, or someone just getting started in the space.

[Stanley Odum]

Regardless of whether or not bonus depreciation reverts back to 100%, 50% on newly constructed properties only as was the case prior to the Tax Cuts & Jobs Act (TCJA), or 0%, depreciating assets according their CORRECT class lives via cost segregation on properties held for a minimum of three to five years to minimize the effects of depreciation recapture upon sale is still beneficial depending on the taxpayers' circumstances. Cost segregation is a time value of money play so taking large losses upfront in the form of bonus depreciation makes the most sense when rental income and the property owner's tax rate is highest. It is also important to note that straight-line depreciating short-lived (5-, 7-, and 15-year) assets associated with a building over 39- or 27.5-years is considered an impermissible method of accounting. Cost segregation is an acceptable method of CORRECTLY classifying short-lived assets and complying with the Tangible Property Regulations (i.e., when removing and disposing assets). Besides CORRECT asset classification and compliance, there is a benefit to spreading out the expense (loss) resulting from a cost segregation study vs. taking all the expense (loss) upfront in the first year in the form of bonus depreciation. An example would be a taxpayer who acquires a property that has high turnover/low occupancy (income) and anticipates low turnover/higher occupancy (income) in the next few years. For properties that qualify for 100% bonus depreciation (purchased or constructed and placed into service from 2018 to 2022), many of our cost segregation clients either carry forward large losses until absorbed or, in some instances, elect out of bonus depreciation by asset class to avoid the large carryforward. Disclaimer: This does not constitute tax advice. Consult with a licensed tax practitioner.