The Tax-Savvy Real Estate Investor
Tax Tips & Wealth Building Insights
JULY 2025
Overview
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OBJECTIVE
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PROBLEM
Staying current with ever-evolving tax codes, accounting standards, and market shifts is challenging and time-consuming, especially for busy real estate investors and entrepreneurs. Mistimed acquisitions, missed deductions, and lack of awareness about impending legislative changes can erode profits and stall growth. Our playbook solves this problem by providing timely, curated, and expert-driven guidance—all in one place—so you can confidently take proactive action rather than react late to tax and regulatory changes.
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CONTACT US
At Aiola CPA, we measure our success by your results. By combining technical expertise, industry specialization, personal investment experience, and a client-centered approach, we aim to help you reduce tax liabilities, streamline operations, and ultimately build long-term wealth through real estate.
Ready to Take the Next Step?
Contact Us Today
CPA Insights
Welcome to the June 2025 edition of CPA Insights, your trusted source for tax and real estate updates. We’re here to keep you informed about the changes that matter most to your business and investments. This month, we’re focusing on bonus depreciation under the recently enacted One Big Beautiful Bill Act (OBBBA) and strategies for real estate investors in the second half of 2025. Let’s explore what’s new and how you can stay ahead.
Bonus Depreciation Compliance and Planning for 2025
The OBBBA, enacted on July 4, 2025, restores 100% bonus depreciation for qualified property acquired and placed in service from January 19, 2025, to December 31, 2029, reversing the prior phase-down to 40%. This allows taxpayers to deduct the full cost of eligible assets, such as furniture, cabinets, countertops, pools, and landscaping, in the year they are placed in service. Assets acquired or placed in service before January 19, 2025, remain subject to the 40% rate unless transitional rules apply. On disposition, gain or loss recognition may trigger recapture rules if sold before full depreciation.
The OBBBA expands eligibility for used property, allowing 100% bonus depreciation if the property wasn’t previously used by the taxpayer or a related party and is acquired in an arm’s-length transaction with a cost-based basis. This is a game changer for real estate investors acquiring existing properties with depreciable components. By leveraging cost segregation studies, investors can identify assets with shorter recovery periods, to claim immediate deductions. Thorough documentation is critical to support these claims and avoid IRS audit issues.
Real estate investors, developers, and landlords, particularly those with short-term rental properties or those who qualify for real estate professional status, stand to benefit significantly. High income earners should consider timing acquisitions to maximize the 100% bonus depreciation rate before potential future phase-outs. Consulting with our advisors and engaging with a cost segregation firm can maximize tax savings.
To capitalize on these opportunities, review planned acquisitions or improvements to ensure they are placed in service on or after January 19, 2025. Conduct cost segregation studies to identify eligible components and document all transactions meticulously, including acquisition dates and costs, to comply with IRS rules. Our team can help project the impact on your 2025 tax liability and develop sound tax strategies.
Staying Informed and Proactive
While no resource can predict future legislative outcomes with complete certainty, awareness of these current and impending changes empowers you to pivot your strategies accordingly.
At Aiola CPA, we emphasize proactive tax planning to ensure you remain ahead of the curve, flexible, and ready to capitalize on opportunities that arise.
Evergreen Tax Strategies for Real Estate Investors
When it comes to real estate investing, finding tax-efficient ways to realize gains is key to building long-term wealth. One strategy that often flies under the radar is the live-in flip – a practical approach that allows you to use your primary residence to generate profits, potentially without paying tax on the gain.
The Live-In Flip Strategy: Achieving Tax-Free Gains on Sale
What It Is
The live-in flip involves purchasing a property, living in it as your primary residence for at least two of the five years prior to sale while making improvements, and then selling for a profit. This can qualify you for the Section 121 exclusion, which allows single filers to exclude up to $250,000 in capital gains on the sale of their primary residence, and married couples filing jointly to exclude up to $500,000 – tax-free.
Why It Matters
Traditional flips are typically taxed as ordinary income plus self-employment taxes, which can drain your profits. By turning the property into a primary residence, you can shield a significant portion of the gain from taxes, keeping more capital available for your next investment. This strategy works especially well for newer investors, those downsizing, or anyone looking to combine personal housing with long-term tax strategy.
Keep In Mind
You’ll need to meet both the two-year ownership and residency requirements, and remember that the exclusion only applies to the gain – not to depreciation recapture if the property was ever used as a rental. Keep detailed records of any improvements, since they raise your basis and reduce taxable gain. The IRS pays close attention to these types of sales, so be sure your residency is well documented (think voter registration, utility bills, etc.). Loop in our team early so we can help you structure the flip properly and avoid any tax surprises.
Putting It All Together
The live-in flip turns a regular home sale into a tax-advantaged exit, helping you save tens or even hundreds of thousands in taxes while building equity through smart planning and effort. With the right timing, you can take full advantage of the exclusion without losing sight of your bigger investment goals.
Let’s make sure you get it right – reach out to Aiola CPA before your next purchase to see how this strategy fits into your tax plans.
Case Study: Capitalizing on the "One Big Beautiful Bill Act" Provisions for Multifamily Real Estate Expansion
Note: For client confidentiality, the names and certain details in this case study have been altered.
Client Background
“Jordan,” is a Texas-based real estate investor who qualifies as a real estate professional and focuses on multifamily properties to generate steady rental income and long-term appreciation. With the “One Big Beautiful Bill Act” (OBBBA) freshly enacted, Jordan seized the opportunity to acquire a $1.8 million multifamily complex to take advantage of the tax benefits associated with acquisition of a new rental property.
Initial Situation (July 2025)
The OBBBA makes 100% bonus depreciation permanent (through 2029) for qualifying assets and elevates the Qualified Business Income (QBI) deduction to a permanent 20% for pass-through entities. Jordan closed on the property July 15, positioning the investment to fully harness these provisions.
Challenges Identified
- Identifying Eligible Assets: Break out the depreciable components of the purchase to maximize 100% bonus depreciation.
- Ensuring Real Estate Professional Status (REPS) Eligibility: Tracking time to make sure Jordan meets the requirements to qualify as a real estate professional in order to treat the current year losses as nonpassive.
- Integration with Existing Portfolio: Aligning the new acquisition with existing properties with respect to management, operations, and time tracking (electing to aggregate all rental properties as a single activity for REPS).
- Audit-Proof Compliance: Documenting in service dates, cost segregation studies, and time logs to support material participation.
Strategic Actions Taken
Jordan teamed up with us to implement a tax strategy with the OBBBA in mind:
- Performed a cost-segregation study on the purchase. The study identified $400,000 of value allocated to assets with a useful life under 20 years, allowing Jordan to 100% bonus depreciate the full $400,000 this year.
- Kept a contemporaneous time log. Tracking time daily on a time log supports Jordan’s claim that he qualifies for REPS by spending over 50% of his time and more than 750 hours in eligible real estate businesses.
- Accelerated plans for energy efficiency. With several clean energy tax credits expiring before 2026, Jordan will install solar panels to maximize tax benefits before the tax benefit expires.
Quantifying the Impact
The 100% bonus depreciation of $400,000 yielded a $148,000 federal tax savings (at Jordan’s 37% bracket), far surpassing the $160,000 deduction that would have applied under pre-OBBBA law of 40% bonus depreciation.
Strategic Insight: Without tje OBBBA, Jordan’s deductions would have been spread out over time, delaying reinvestment. With the bill now signed into law, he can scale confidently with a clearer view of long-term returns.
Conclusion & Lessons Learned
The OBBBA’s recent passage is a great reminder of how smart, timely tax planning can pay off:
- Layered Strategies: Pair 100% bonus depreciation with energy efficient improvements in 2025.
- Plan Early: Tracking your time and building an audit defense as you go can make a big difference later.
- Lean on Experts: Having the right team helps you navigate the details and stay on track.
Jordan’s results show just how impactful these changes can be for multifamily investors. Reach out to Aiola CPA to see how you can take advantage of the OBBBA in your 2025 strategy.
Accounting Guidelines
In real estate investing, clean accounting isn’t just helpful – it’s essential for scaling and staying tax-efficient.
Solidify Your Accounting System to Support Maximum Tax Deductions
Setting With the One Big Beautiful Bill Act (OBBBA) now in place, investors can take advantage of 100% bonus depreciation, but only if their systems are set up to support it.
That means tracking fixed assets by acquisition date, cost basis, and in-service date. Cost segregation becomes even more valuable, allowing you to break out assets with shorter depreciable lives for accelerated deductions. It’s also important to distinguish between capital improvements and repairs – missteps here can lead to missed deductions or audit risk. For self-managing investors, property-level income and expenses should be clearly separated to evaluate performance and simplify year-end reporting.
Accurate accounting directly impacts cash flow, tax liability, and reinvestment planning. Bonus depreciation gives you the ability to deduct the cost of qualified assets immediately, but only if records are complete and up to date. Without the right systems, you risk leaving money on the table or scrambling at tax time.
Now is the time to review your depreciation schedules, confirm eligibility for assets acquired and placed in service after January 19, 2025, and evaluate whether a cost segregation study makes sense. Our team can help you identify gaps, clean up your systems, and put the right structure in place.
Putting It All Together
A solid accounting foundation is crucial for monitoring the financial health of your investments. Reach out to Aiola CPA to make sure your systems are ready to support growth and take full advantage of the 2025 tax changes.
Market Outlook
Buyer’s Market Solidifies: Seizing Opportunities in a Corrective Phase
As we move through 2025, the housing market has shifted in favor of buyers. Inventory is up, price growth is slowing, and demand remains steady. This creates strong conditions for investors looking to acquire. While affordability is still a concern and sales volumes are down, this is a market correction, not a crash. For strategic buyers, it’s a window of opportunity to grow. Here’s what to keep in mind for the second half of the year.
Inventory Rises, But Growth Moderates
- Active Inventory: Total listings stand below 1.5 million, up 15% year-over-year, yet still well short of pre-pandemic norms (1.7 million in 2016-2020).
- New Listings: Up year-over-year, but monthly growth is slowing; the largest year-over-year increase in over six months signals a potential peak.
- Regional Shifts: New listings surge in the Midwest (Warren, MI +10%, Cleveland +7.5%, Milwaukee +5%), while declining sharply in the Sun Belt (Tampa -18%, Orlando -16%, San Diego -12%).
- Takeaway: Inventory buildup favors buyers, but moderating supply growth hints at stabilization. Monitor your local market closely.
Demand Surges Despite High Rates
- Buyer Activity: Mortgage purchase applications have risen for 22 consecutive weeks, with nine straight weeks of double-digit year-over-year gains.
- Perception vs. Reality: Despite social media claims of “no buyers,” demand is climbing as buyers adapt to rates around 6.65%-6.7%.
- National Focus: Strong directional growth nationally, though regional demand data remains limited.
- Takeaway: More buyers are entering, but sellers still outpace them, use this imbalance for negotiation power.
Home Prices Trend Lower, Volumes Lag
- Price Growth: National appreciation is +1.4% year-over-year, down from 5% last May and below inflation (~2.5%), signaling real price erosion.
- Regional Variations: Strong gains in the Midwest/Northeast (Detroit +10%, New York metro ~10%, Cleveland +7%), with declines in expensive markets (Oakland, San Diego, West Palm Beach, Atlanta, Tampa).
- Sales Volume: Annualized at ~4 million, slightly down year-over-year and well below normal (5-5.25 million), dragging on industry health.
- Takeaway: Focus on stabilized assets in appreciating regions; avoid fringe properties prone to further corrections.
Crash Risks Remain Low
- Delinquencies: Serious delinquencies (90+ days) dipped last month to 0.55%, below pre-pandemic levels and 10x lower than 2008 peaks.
- Forced Selling: Absent, with 90% of homeowners locked in below 5% rates; multifamily delinquencies (up but low at ~0.6%) are isolated and expected due to refinancing pressures.
- Macro Context: No evidence of tipping into danger; corrections are cyclical, not catastrophic.
- Takeaway: Build in buffers for potential 2-3% declines, but data points to equilibrium, not collapse.
Bottom Line
Q&A: Top Questions from Our Clients
Below are three questions we’ve received from clients this month.
Q: Can real estate investors use the OBBBA’s 100% bonus depreciation for renovations completed on existing properties in 2025?
A: Yes, under the OBBBA, 100% bonus depreciation applies to qualified property improvements placed in service after January 19, 2025, with a recovery period of 20 years or less.
Q: How does the OBBBA’s 100% bonus depreciation apply to short-term rental (STR) properties acquired in 2025?
A: The OBBBA allows 100% bonus depreciation for qualifying assets (e.g., furniture, appliances, or non-structural upgrades) in STRs acquired and placed in service after January 19, 2025.
Q: Can real estate losses offset W-2 income?
A: Yes, but only if the real estate activity is nonpassive – such as, materially participating in a short-term rental with an average length of guest stay of 7 days or less, or qualifying as a real estate professional for a long-term or mid-term rental.
Endnotes & Resources
At Aiola CPA, we aim to equip you with the knowledge and tools to navigate tax strategies, avoid accounting pitfalls, and seize real estate opportunities in 2025. This section summarizes the citations and sources from this month’s newsletter.
Legislative Updates
- “One Big Beautiful Bill Act”: Enacted on July 4, 2025, the OBBBA reinstates permanent 100% bonus depreciation for qualified property acquired and placed in service on or after January 19, 2025, through December 31, 2029.
- Source: OBBBA (H.R. 1, July 4, 2025).
Real Estate Market Guidance
- Inventory Levels: Just under 1.5 million active listings – up 15% year-over-year but still below pre-2020 norms.
- Price Trends: Up 1.4% year-over-year, below inflation, with list-to-sale ratios at 99%, giving buyers more leverage.
- Sales Volume: Around 4 million annualized – below normal but stable.
- Mortgage Rates and Demand: Mortgage rates hover near 6.7%, yet buyer demand is strong with 22 straight weeks of rising applications.
- Sources: Redfin (July 2025); Freddie Mac (June 2025); Fannie Mae (June 2025); Bigger Pockets Housing Market Update (July 2025).
Thank You
We’re proud to be your trusted partner in navigating 2025’s tax and real estate landscape. Whether it’s optimizing bonus depreciation, dodging accounting errors, or timing market moves, Aiola CPA is here to help. Reach out to discuss your strategy and make smart tax and investment decisions!
To your continued success,
The Aiola CPA Team
Contact Information & Next Steps
Turning Knowledge into Action
We hope this edition of The Tax-Savvy Real Estate Investor has armed you with valuable information and sparked ideas for enhancing your tax efficiency, refining your accounting practices, and exploring new market opportunities. However, information alone is not enough – real transformation requires taking the next step.
How Aiola CPA Can Help
As a specialized CPA firm focused on real estate, our mission is to deliver proactive tax planning that helps investors navigate complex tax strategies and turns them into digestible action steps. Whether you’re a seasoned investor with a diverse portfolio or a newcomer aiming to build a stable foundation, we’re here to help you tailor strategies that align with your unique goals.
Services Offered
- Tax Advisory: We provide proactive, strategic guidance tailored to real estate investors. From tax planning and running projections to timing acquisitions and managing passive activity rules, we help you plan ahead and avoid surprises.
- Tax Preparation: Our team prepares accurate, thorough returns with a focus on capturing real estate specific deductions and credits. We stay current on tax law changes so your filings are both compliant and optimized.
- Accounting & Financial: Clean books are essential for scaling a real estate portfolio. We help you track income and expenses by property, manage depreciation schedules, reconcile all accounts, and produce financial reports that support smart decision-making.
- Audit Support: If you’re audited, we represent you and handle the communication and documentation so you don’t have to. Our experience with real estate audits means we know what the IRS is looking for and how to protect your position.
The Consultation Process:
- Initial Inquiry: Complete our intake form and receive an email from us with a packet of information on our services and pricing, and a link to schedule an intro meeting.
- Discovery Meeting: We’ll schedule a complimentary 30-minute video meeting to assess your situation, provide more info on our services and how we can help, and outline potential next steps.
- Proposal & Engagement: After understanding your goals and reviewing initial information, we’ll propose a tailored service plan detailing the scope of work, deliverables, and fees.
- Ongoing Advisory & Implementation: Once engaged, we become your partner in navigating the financial and regulatory landscape. Through initial strategic discussions, regular check-ups, timely alerts on legislative changes, and real-time advice, we help you stay up-to-date and proactive rather than reactive.
Staying Informed & Connected:
- Playbook Subscription: If you received this playbook from a friend or colleague, be sure to subscribe directly on our website to ensure you never miss an update. We’ll continue to provide market insights, regulatory alerts, and strategic recommendations in future editions.
- Social Media & Blog Posts: We are committed to additional content rollouts this year, as well. Follow us on our various social media channels and visit our website’s blog for timely articles, quick tips, and breaking news that can affect your portfolio.
- Webinars & Workshops: Stay tuned for invitations to our upcoming educational webinars and workshops, where we discuss advanced topics and tax strategies to maximize your benefit.
Our Commitment to Your Success:
At Aiola CPA, we measure our success by your results. By combining technical expertise, industry specialization, personal investment experience, and a client-centered approach, we aim to help you reduce tax liabilities, streamline operations, and ultimately build long-term wealth through real estate.
Ready to Take the Next Step?
Contact us today to schedule a discovery call and learn how we can help you make the most of your investments, navigate a changing tax landscape, and achieve your financial goals.
