How 2025 Tax Changes Could Reshape Real Estate Investing

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In This Article

It’s not exactly breaking news: Taxes change. But what’s brewing for 2025 could be the biggest shake-up in real estate tax policy in a generation. And whether you’re a long-time investor or just closing on your first rental, the moves you make now (before those changes kick in) could shape your financial future for decades to come.

Here at BiggerPockets, we’ve been watching this unfold closely. Our partners at Rent To Retirement have also been hard at work helping investors navigate what’s coming. Together, we’re breaking it all down so you’re not caught off guard—and might maybe even end up ahead.

What’s Happening in 2025?

Several key tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025 unless Congress extends them. These provisions have helped real estate investors, especially those using depreciation, pass-through deductions, and estate planning strategies.

Here are the five biggest things to watch.

1. Bonus depreciation might make a comeback

Let’s start with what might be good news.

Under the original TCJA, real estate investors could use 100% bonus depreciation to deduct the full cost of qualifying assets in the year they were placed in service: furniture, appliances, HVAC systems, and more. That was huge for anyone running cost segregation studies on their rentals. But it’s been phasing out:

2023: 80%

2024: 60%

2025: 40%

2026: 20%

2027: Gone (unless extended)

Here’s the twist: Congress might be bringing 100% bonus depreciation back. A newly proposed tax bill, dubbed the “One Big Beautiful Bill,” includes a reinstatement of full bonus depreciation, retroactive to January 2025. Treasury officials and business leaders are optimistic it could pass this year.

If that happens, it’s another shot for investors to write off a significant portion of their investment properties in year one. If not? 2025’s 40% bonus depreciation might be your last real chance to benefit.

2. Estate and gift tax exemptions could be cut in half

If you’re building long-term wealth with real estate, this one matters more than you think. Right now, the estate tax exemption is about $13.6 million per individual (double that for married couples). That means most rental investors don’t worry about estate taxes.

But in 2026, that number could drop to around $7 million per person, which suddenly puts many more portfolios at risk of significant taxation during transfer.

For many real estate investors who’ve built their wealth slowly, especially using leverage, this reminds them to think about trusts, gifting strategies, and tax planning now, not later.

3. The 20% pass-through deduction is set to expire

Suppose you’re a landlord or operate through an LLC. In that case, you might currently qualify for the Qualified Business Income (QBI) deduction, which gives a 20% write-off on rental income if your business meets the criteria. But this deduction goes away at the end of 2025 unless extended.

This could mean thousands more in taxes each year for investors with high rental income, especially in states without favorable tax treatment. This is a great time to evaluate whether your rental operation qualifies as a business (versus passive income) and whether it’s time to restructure your portfolio.

4. Personal income tax rates could go up

This affects everyone, investor or not. The tax brackets from the TCJA were lowered across the board. But in 2026, those rates could increase again:

The top bracket jumps back to 39.6% (from 37%).

Lower brackets shift upward, too.

If you’re earning W-2 income or actively managing rentals (like short-term rentals or flips), you might be paying a higher rate on that income.

Savvy investors are already looking into Roth conversions, year-end acceleration of income or deductions, and leveraging depreciation while rates are lower.

5. The 1031 exchange could face new scrutiny

To be clear: The 1031 exchange isn’t currently set to expire like some other tax provisions. However, it has been the subject of ongoing discussions and proposals to limit its use, particularly for higher-value transactions or luxury properties.

If you’ve been holding on to a property with significant equity and are considering a sale, 2025 could be a smart time to take advantage of the current 1031 rules and defer your capital gains.

What BiggerPockets Members Can Do Now

You don’t have to be a tax expert. But the name of the game? Be proactive, not reactive.

Smart investors can do the following:

Talk to a CPA who understands real estate.

Consider whether a cost segregation study makes sense or wait for more information on bonus depreciation.

Review your legal and trust structures.

Consider accelerating purchases before depreciation phases out.

Reassess whether you should be using 1031 exchanges now.

Where Turnkey Fits In

We love working with Rent To Retirement because they don’t just sell turnkey rental properties; they help investors plan for tax efficiency and long-term wealth.

They’ve built a national network of tax advisors, lenders, and markets where you can still buy fully renovated, cash-flowing rentals with depreciation and cost seg potential already in mind. And their inventory is in states with landlord-friendly laws and better overall tax profiles.

Whether you’re just getting started or trying to grow a $5 million portfolio without the headaches of rehabs and local teams, RTR helps make that possible and ensures you’re buying with all the important factors of real estate investing in mind.

Final Thoughts

2025 might be the last year of “tax rules as we know them.” And while we can’t predict what Congress will do, one thing is clear: The best investors don’t just buy properties; they buy time, options, and act wisely.

Take advantage of what we still have, and prepare for what’s ahead.