President Trump signed the “One Big Beautiful Bill” (OBBB) — a sweeping tax package that has cleared both the House and Senate. For real estate investors and 1031 exchange clients, the key takeaway is how these changes create new opportunities for tax deferral, accelerated deductions, and strategic planning.
Below is a clear summary of the provisions most relevant to our clients.
Key Highlights for Real Estate Investors
100% Bonus Depreciation — Now Permanent
The OBBB permanently allows real estate investors to claim full 100% bonus depreciation on qualifying personal property placed in service after January 19, 2025. This means you can write off the entire cost of certain improvements and assets in the first year instead of spreading it over decades. Combined with a 1031 exchange, this allows you to defer capital gains while maximizing immediate deductions on replacement property upgrades or new acquisitions.
Section 179 Expensing Limit Increased
The maximum expensing limit for qualifying business property doubles to $2.5 million, phasing out when total qualified purchases exceed $4 million. Both thresholds will adjust for inflation starting in 2026. This increase is especially helpful for real estate investors who purchase equipment, fixtures, or certain property improvements when acquiring replacement property through a 1031 exchange.
SALT Deduction Cap Increased and Workaround Preserved
The state and local tax (SALT) deduction cap rises to $40,000 through 2029 before reverting to $10,000. This higher cap provides more room for high-income real estate investors to deduct state and local taxes paid on income and property. The bill also keeps the passthrough entity SALT workaround intact, allowing partnerships and S-corporations to continue paying state taxes at the entity level to maximize deductions.
Qualified Business Income (QBI) Deduction Made Permanent
The 20% deduction for qualified business income from passthrough entities like LLCs, partnerships, and S-corporations is now permanent. The phase-in thresholds have been expanded, making this deduction more accessible for real estate investors who receive rental income through these structures.
Opportunity Zones Program Extended Indefinitely
The Opportunity Zones (OZ) program is now permanent, encouraging long-term deferral and possible exclusion of capital gains for investments in designated areas. For real estate investors, this tool can complement a 1031 exchange strategy when carefully planned, offering another way to defer gains and potentially eliminate a portion of tax liability.
Additional Changes Worth Noting
Individual Income Tax Rates & Standard Deduction
The existing lower rate brackets and higher standard deductions will remain in place permanently, helping many investors keep more income sheltered from tax.
Estate and Gift Tax Exemption
The federal estate tax exclusion increases to $15 million starting in 2026, with annual inflation adjustments. Investors with significant real estate holdings should revisit their estate planning to ensure their legacy transfers efficiently.
Mortgage Interest Deduction
The current $750,000 limit on mortgage interest for new mortgages is now permanent, and qualified mortgage insurance premiums may continue to count as deductible residence interest.
Expanded Disaster Relief
New rules expand disaster loss deductions for victims of federally declared disasters occurring in 2025, including relief for wildfire and storm-affected property owners. Qualifying losses can be deducted even without itemizing.
How This Connects to Your 1031 Exchange
These changes underscore why smart tax planning is essential for real estate investors. Combining a 1031 exchange with permanent bonus depreciation, increased expensing, and preserved deductions can significantly reduce taxable income while deferring capital gains. SALT deductions and a permanent QBI deduction mean investors can keep more of what they earn.
We encourage all clients to consult with their CPA or tax advisor regarding how the provisions of the new tax legislation may specifically impact their individual tax situation. While we provide general insights related to 1031 exchanges and real estate tax strategies, your advisor can offer personalized guidance based on your complete financial picture.
Have Questions?
Call us at (866) 357-1031 or visit www.PeakExchange.com for more information.