Cliff Notes - Big Beautiful Tax Bill & How It Impact Real Estate Investors

This was a great breakdown from one of our local tax advisors Nathan Quesenberry, EA with LOQ Consulting Group. If you have any specific questions please give Nathan a call or email (contact info below).

--------------------------------------------------------------------------------------------------------------------------------------------------------------------

I am writing to provide you with a "cliff notes" of the major tax law changes enacted under the "One Big Beautiful Bill Act" (OBBBA), signed into law on 07/04/2025. I will be discussing what is changing for 2025 only, the 2026 and future changes will come in a future email. Please keep in mind that this is not an exhaustive list of the changes or the requirements.

Tax Changes for Individuals

The Individual Tax Rates generally remain unchanged from the 2017 TCJA and are now permanent. There was a slight adjustment to the brackets of 10% & 12% which will provide a small tax cut.

The standard deduction has been further increased. For 2025, the standard deduction is $23,625 for heads of household, $15,750 for single filers and $31,500 for married couples filing jointly.

There is a new additional deduction for seniors of $6,000

The Child Tax Credit is now $2,200 with $1,700 of it being fully refundable.

Mortgage Interest Deduction: The $750,000 loan limit cap on the mortgage interest deduction remains, but mortgage insurance premiums are now treated as interest.

State Governors can now declare a disaster area which will allow the deductibility of casualty losses. Prior to this it had to be the president that declared a disaster area.

State & Local Taxes: The cap on state and local tax (SALT) deductions is increased to $40,000 ($20,000 for married filing separately) for 2025, with inflation adjustments and a phase-down for incomes above 500,000.

New Deductions

No Tax on Tips -- Up to $25,000 in tips can be deducted from income -- We will need further IRS guidance on this, but it seems this only applies to cash tips so far.

No Tax on Overtime -- Up to $12,500 ($25,000 if filing jointly) can be deducted from income -- We will also need further IRS guidance here, but generally this seems to apply only to non-salaried workers

Auto Loan Interest Deduction -- Up to $10,000 can be deducted from income -- Requires a US produced car which is new, also only applies to cars purchased in 2025 or after.

Adoption Credit: Up to $5,000 of the adoption credit is now refundable whereas prior, the credit was entirely nonrefundable

Tax Changes for Businesses

Bonus Depreciation: 100% bonus depreciation for qualified business property has returned and the provision is now permanent.

Section 179 Expensing: The deduction limit is increased to $2.5 million, with a phaseout at $4 million.

Qualified Small Business Stock: The per-issuer limit is increased to $15 million, and the gross assets test to $75 million, both indexed for inflation. The exclusion is phased in: 50% at 3 years, 75% at 4 years, and 100% at 5 years for new stock.

The Qualified Business Income Deduction is now permanent and still remains at 20%; although there were some changes to the calculations on the back end.

Energy and Green Tax Provisions

All electric and clean vehicle credits are expiring after 09/30/2025

Energy efficiency credits for your home are expiring after 12/31/2025

1099 NEC & 1099 K

The requirement to be issued a 1099-NEC or 1099-MISC is now $2,000 and will be indexed for inflation

The requirement to be issued a 1099-K returns to $20,000 or 200 transactions

These changes are extensive and may have significant implications for your tax planning, compliance, and reporting. We recommend reviewing your current tax situation and considering how these new tax laws may affect you or your business.

We will continue to monitor IRS guidance and any further legislative developments and will keep you informed of any additional changes.

If you have any questions or would like to discuss how these changes may impact you, please do not hesitate to contact us.

Nathaniel Quesenberry, EA

Tax Partner

Office: (540) 503-3343

Cell: (540) 787-0222

Email: nathan_quesenberry@loqconsultingllc.com

Website: www.loqconsultingllc.com

1 comment