Tax Tips & Wealth Building Insights
MAY 2025
Welcome to the May 2025 edition of CPA Insights, your go-to resource for tax and economic updates tailored to real estate investors. As a CPA firm dedicated to the real estate industry, we’re here to keep you informed about the changes that matter most to your business and investments. This month, we’re focusing on the proposed “One Big Beautiful Bill Act” and its implications for the real estate sector. Let’s explore what’s new and how you can stay ahead.
On May 22, 2025, the House passed H.R. 1, known as the “One Big Beautiful Bill Act.” This comprehensive tax reform bill makes many provisions of the Tax Cuts and Jobs Act (TCJA) permanent, introduces new deductions and credits, and significantly alters energy-related tax incentives. As a real estate professional or investor, several key changes in this bill could impact your tax planning and investment strategies. Here’s what you need to know:
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 planning—running “what-if” scenarios, monitoring legislative updates, and collaborating closely with your legal and financial team—to ensure you remain agile, compliant, and poised to capitalize on opportunities in 2025 and beyond.
In the dynamic world of real estate investing, tax strategies that stand the test of time are invaluable. This month, we’re introducing two fresh approaches—bonus depreciation for real estate gains, and leveraging 1031 exchanges for tax deferral—designed to help you minimize taxes and maximize returns. These strategies are evergreen, yet they align seamlessly with the provisions of the “One Big Beautiful Bill Act”.
The “One Big Beautiful Bill Act” restores 100% bonus depreciation, allowing real estate investors to immediately deduct the full cost of qualifying property in the year it’s placed in service. This applies to assets with a recovery period of 20 years or less, such as certain improvements to rental properties (e.g., cabinets, countertops, floating flooring, landscaping, pools, etc.) and equipment used in real estate businesses.
This provision accelerates tax deductions, reducing your taxable income significantly in the short term. For example, if you spend $50,000 on qualifying improvements to a rental property in 2025, you can deduct the entire amount that year, rather than spreading it over decades. This boosts cash flow and frees up capital for reinvestment—crucial for growing your portfolio. With the bill making this permanent, it’s a reliable strategy for long-term planning.
Not all property qualifies—land and structural components of the building don’t, but components like appliances, furniture, or certain renovations often do. To maximize this, conduct a cost segregation study to identify and separate eligible assets from the building’s structure. Timing is also key: ensure the property is “placed in service” (ready and available for use) by year-end to claim the deduction. Work with a tax professional to confirm eligibility and optimize your depreciation schedule.
A 1031 exchange allows you to defer capital gains taxes by reinvesting proceeds from the sale of one investment property into another “like-kind” property. This IRS-approved strategy can postpone tax liability indefinitely, provided you follow strict timelines and rules.
Deferring taxes preserves your capital, enabling you to reinvest more into your next property and compound your wealth over time. The “One Big Beautiful Bill Act” enhances this strategy by making the Qualified Business Income (QBI) deduction permanent and increasing it to 23%. If your replacement property generates rental income through a pass-through entity, you could pair the tax deferral of a 1031 exchange with a boosted QBI deduction, amplifying your tax savings.
To qualify, you must identify a replacement property within 45 days and close within 180 days of selling the original property. The properties must be of similar nature (e.g., real estate for real estate), and a qualified intermediary is required to handle the transaction. Work with a tax advisor to ensure compliance and explore how the bill’s provisions can enhance your long-term strategy.
Combining 1031 exchanges with 100% bonus depreciation creates a powerful duo—deferring taxes on gains while slashing current taxable income through immediate deductions. With the “One Big Beautiful Bill Act” enhancing these tools, 2025 is an ideal time to refine your strategy. Reach out to Aiola CPA, your real estate-specialized CPA, for personalized advice.
Note: For client confidentiality, the names and certain details in this case study have been altered.
“Brian,” a seasoned real estate investor in Texas, owns a portfolio of single-family rental homes and small multifamily units. In early 2025, Brian expanded his portfolio by purchasing a short-term rental (STR) property for $800,000. With the “One Big Beautiful Bill Act,” Brian leveraged the restored 100% bonus depreciation and other tax provisions to maximize savings and accelerate wealth building. As an material participant in the STR, Brian can report this activity as nonpassive and utilize the tax losses to offset his high W-2 income.
The new law introduced key provisions that Brian could utilize, namely 100% bonus depreciation, which allows immediate deduction of the depreciable portion of qualifying assets, such as the components of the building and improvements (but not the land).
Brian saw 2025 as an optimal time to invest, particularly with the ability to deduct the depreciable cost of a new property upfront.
The $800,000 purchase price was split: 20% ($160,000) allocated to non-depreciable land and 80% ($640,000) to the depreciable building. Using a cost segregation study, Brian segregated roughly $200,000 worth of 5- and 15-year assets eligible for 100% bonus depreciation, allowing him to deduct 100% of that $200,000, in addition to straight-line depreciation on the remaining 39-year assets. This reduced Brian’s taxable income significantly.
Bonus depreciation savings:
The “One Big Beautiful Bill Act” turned a routine property purchase into a more tax-efficient investment for Brian. Key takeaways:
This approach enhanced Brian’s wealth-building efficiency, providing a model for STR investors in 2025 and beyond.
In light of the “One Big Beautiful Bill Act”, below are two relevant accounting pointers to help polish your balance sheet and P&L, enabling you to see operations clearly and make smart business and investment decisions.
Following these tips helps keep your books clean, organized, and reliable. Performing a status check on your books and financials each month is best practice and helps you:
Aiola CPA can help you implement these best practices and keep your books tax-friendly and audit-ready.
Inventory Continues to Surge
Active listings have climbed to 1.9 million, up 14% year-over-year, offering buyers more choice than in recent years. However, this remains below the 2.2 million listings typical of a balanced market like 2019. The increase is driven by a 10% rise in new listings, with 620,000 properties hitting the market in April 2025.
This inventory growth has extended the median days on market to 47 days, a six-year high, compared to 43 days last month and the 20-30 days seen during the pandemic peak.
Price Growth Stalls, Creating Buyer Leverage
Home prices are up 2% year-over-year, per Redfin, but this growth lags behind the 2.3% inflation rate, meaning real (inflation-adjusted) prices are effectively flat. A growing gap between seller expectations and buyer willingness is evident: the median asking price is $470,000, 9% higher than the $431,000 median sale price—the widest gap since 2020.
This mismatch has led to a surge in price cuts, with 20% of listings seeing reductions, compared to a pre-pandemic norm of 14%. Regional price variations are stark: Jacksonville, FL (-4%), San Francisco (-2.5%), and Austin (-1.6%) are seeing declines, while affordable markets like Milwaukee (+12%) and Cleveland (+9.5%) continue to grow.
The “One Big Beautiful Bill Act” supports investors in this softening market by restoring 100% bonus depreciation through 2029, allowing immediate expensing of property improvements to offset taxable income.
Mortgage Rates Stay High, Dampening Transactions
The 30-year fixed mortgage rate stands at 6.9%, down slightly from 6.93% in January but not low enough to spur significant transaction volume. Bond market uncertainty, fueled by tariffs and economic volatility, keeps rates elevated, with no Federal Reserve rate cuts expected in June.
Despite high rates, mortgage demand is up slightly year-over-year, reflecting resilient buyer interest. In markets like Jacksonville and San Francisco, falling prices have reduced median monthly mortgage payments by up to 4.2%, improving affordability.
The bill’s permanent 23% QBI deduction can help investors offset higher financing costs by reducing taxable income from rental properties.
Rents Flat, Vacancies Rise
Rental prices are flat, with sources like Apartment List showing no significant growth and others like Zillow reporting a 3% increase or Realtor a 3% decrease. Vacancy rates have hit 7%, the highest in eight years, up from 3.8% post-pandemic, driven by a glut of new apartment supply.
Single-family and small multifamily rentals are holding steady, benefiting from strong demand as high home prices push buyers toward renting. However, Class B and C apartment buildings face higher vacancies and weaker pricing due to oversupply, lower immigration, and potential tariff-driven inflation.
A proposed cut to Section 8 funding, which supports 9 million low-income renters, could exacerbate vacancies in lower-end properties if Congress approves it and states don’t fill the gap. Investors should monitor this closely.
Macro Risks: Tariffs, Sentiment, and Section 8
Real estate investors are navigating a transformed tax landscape following the passage of the “One Big Beautiful Bill Act” in May 2025. Below are three timely questions about the bill’s impact, with concise answers to guide your 2025 strategies.
Q: What new tax deductions or credits can I use for my real estate properties under the “One Big Beautiful Bill Act”?
A: The bill delivers several benefits for real estate investors:
100% Bonus Depreciation Returns: Available for qualifying assets placed in service from January 19, 2025, through 2029, this allows immediate expensing of items like equipment or certain property upgrades.
Permanent 23% QBI Deduction: The Qualified Business Income (QBI) deduction under Sec. 199A is now permanent and raised to 23%, cutting taxable income for pass-through entities like LLCs or S corporations used in real estate.
Temporary Standard Deduction Increase: Enhanced for 2025-2028, this may influence whether you itemize deductions like mortgage interest..
Q: Is the 100% bonus depreciation change retroactive to prior years?
A: No, the 100% bonus depreciation introduced by the “One Big Beautiful Bill Act” is not retroactive to any date before January 19, 2025. It applies only to qualifying assets placed in service on or after January 19, 2025, through December 31, 2029. Assets placed in service before January 19, 2025, do not qualify for this benefit.
Q: How do the permanent TCJA tax rates under the “One Big Beautiful Bill Act” affect my real estate investments?
A: The bill locks in the lower individual income tax rates from the Tax Cuts and Jobs Act (TCJA) permanently. For real estate investors, this means rental income and profits from property sales will continue to be taxed at these reduced rates, boosting after-tax returns and making real estate a more appealing long-term investment.
Key Takeaway
The “One Big Beautiful Bill Act” offers real estate investors powerful tools—like permanent tax cuts, enhanced deductions, and time-sensitive benefits—but success depends on proactive planning. Aiola CPA is ready to customize these insights to your portfolio—reach out to optimize your 2025 real estate strategy.
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 key legislative updates, market data, and accounting tools from this month’s newsletter to help you navigate 2025’s real estate landscape.
The “One Big Beautiful Bill Act,” passed on May 22, 2025, brings significant changes for real estate investors:
Source: “One Big Beautiful Bill Act” (H.R. 1, May 22, 2025); IRS Guidelines.
Source: Redfin (April 2025); Apartment List (April 2025); Freddie Mac (April 2025).
Thank You
We’re honored 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 refine your strategy and secure your success!
To your continued success,
The Aiola CPA Team
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.
As a specialized CPA firm focused on real estate, our mission is to deliver proactive advisory services that turn complexity into clarity. 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.
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.
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.
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